- The Clearing House’s real-time payments network is available to 56% of US demand deposit accounts.
- And it must keep growing its reach to battle serious competitors like the Fed and Visa.
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The Clearing House’s (TCH’s) real-time payments (RTP) network now directly reaches 56% of US demand deposit accounts (DDAs) through its roster of financial institutions (FIs), per a press release.
And the network’s capabilities can be made available to a total of 70% of US DDAs because many FIs that aren’t a part of the RTP network can join via banking technology providers like ACI Worldwide and Jack Henry that have already partnered with TCH, a bank-owned payment system operator. TCH claims it’s set to add over 150 banks and credit unions to its network in the next few months, so it’s seemingly on its way to expanding further.
TCH’s RTP network could quickly gain adoption during the pandemic because FIs may want to provide SMBs and consumers with fast access to funds. Many SMBs have faced a cash crunch during the pandemic, while consumers have dealt with unemployment and drops in income, meaning both groups need to be able to access the funds they have quickly. The RTP network can give users instant access to their cash so it can be used or withdrawn quickly, giving businesses and consumers the flexibility they may need. This could potentially entice FIs to join the network so they can help their clients weather the pandemic, building on finance firms’ interest in RTP from before the crisis.
Rapid expansion should be a major initiative for TCH because it’s racing against serious competitors in the fast payment space.
- The US Federal Reserve is set to introduce its own RTP network in 2023 or 2024, but TCH can build an advantage by bringing in more FIs now. FedNow—the Fed’s forthcoming network—won’t have to turn a profit and won’t be owned by major banks like TCH is, which may enable FedNow to offer lower fees and make it more attractive to FIs than TCH’s network. But TCH has a multiyear head start that it should use to attract FIs and develop its relationships so that FIs aren’t as interested in joining the new network when FedNow does launch.
- Mastercard and Visa are expanding their own noncard fast payment offerings, challenging TCH’s network in the process. Mastercard Send and Visa Direct are the card networks’ efforts to avoid being disintermediated by networks like TCH’s by offering noncard fast payment capabilities. Their established relationships with FIs, merchants, and consumers could help them gain adoption faster that TCH’s network—Visa Direct just scored a major tie-up with PayPal, for example—so TCH needs to quickly build out its network to make sure it can effectively compete with the card networks.
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