Gig Economy and Commission Payments Drive RTP Adoption
Banks and lending institutions are seeing a push for real-time payments but the reasons for rolling out this service may surprise you. In a recent Icon Solutions webinar entitled, “What Do Real-Time Payments Mean for Corporates?,” Steve Ledford, Senior Vice President of Product & Strategy of The Clearing House, broke down what is driving the adoption of volume on the RTP network and what’s in store for the future of the faster payment service.
The following is an edited version of Ledford’s introductory remarks:
What do firms find compelling about RTP?
Steve Ledford, The Clearing House: Companies have different needs and therefore they like having choices. We've definitely seen this in the early days of the RTP network. We launched in November of 2017 and over the past year-and-a-half, we've seen the reach of the network expand and a number of different use cases have been emerging
One of the things we saw emerging very early on were payroll-like use cases. We originally thought of payroll as payroll, but for most companies there's actually a variety of different payroll or payroll-like applications. One of the first we saw was expense reimbursement and commissions for an independent broker or a financial adviser of an asset management company. Or it could also be from an insurance company to independent agents.
We also saw basic straightforward invoice payments. I've received an invoice and I want to make sure I pay it on a timely basis and this is a way of doing it.
We also saw a lot of interest in account-to-account payments. Whether it's “I have an account at my bank and I want to transfer it to another account,” there was a lot of interest from various e-wallets and tech companies for savings or payment-related things.
We've also seen payments to contractors in the gig economy. If someone is not a full-time employee but you want to pay them on a timely basis, there's a lot of interest in being able to adapt to their interests and demands.
What are the drivers?
Ledford: The ability to have a more efficient process is important. The ability to reduce some of the back office cost is important but the big driver across all of the use cases is that they're very much focused on “What can I do to get greater satisfaction from that receiver?”
That could either be one of your own employees, things like expense reimbursement and payroll are a good first application. We've heard a number of companies that have said “That would be the first application I do in my company.” And then that becomes a showplace for moving it into some of the other applications.
Then when you look at account-to-account payments, banks realizes that customers are more likely to leave money in the account if you can get to it.
What is next on TCH’s roadmap?
Ledford: There's a lot of functionality that is built into the RTP network but one of the things that we realize is that folks need to feel confident. They need to really ease into some of the more advanced functionality.
One of the features is request for payments. It's a way of presenting a bill or an invoice but you need to have both sides of the equation up to speed and in sync to do that.
In the third quarter, we have a number of banks that are going to be matching off billers and bill payers or suppliers and buyers for invoice delivery and bill delivery using this Request for Payment as a way of priming the pump for those applications.
We're going to be doing work to expand the number of active use cases through this pilot activity.
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Read an Icon Solutions blog summarizing the webinar.