The State of Union With Real-Time Payments


Amit Goel

Co-Founder at


One way or another, instant payments OR real-time payments is becoming a part of the routine as technology and payments systems evolve. Financial institutions are putting significant efforts into bringing affordable and safe instant payments systems to market. Meanwhile, as consumers, we can already enjoy their convenience with Google Wallet that recently enabled instant payments using a phone number. However, we are still not at a stage when instant payments are a habitual every-day practice. While consumers have extremely high expectations from payments providers, it is actually quite complex.

When we talk about real time payments, there are four aspects to the concept. The first aspect is ‘Authorization’ where the payments made are certified. This is followed by ‘Posting’ where payments are made available immediately after the transactions. The third aspect is ‘Settlement’ in which any outstanding obligations between financial institutions is settled. The last aspect of real-time payment is ‘Notification’ where both the payee and the payer are notified about the status of the confirmation once the funds are received.

Benefits of real-time payments for customers:
1. Convenience – Consumers can pay each other directly from their existing accounts using online or mobile banking

2. Provides account data privacy and ease of use

3. Cost Savings – Provides a better alternative to costly funds transfers, check cashing services and last-minute bill pay

4. Certainty – Senders and receivers will receive immediate notification of payment, and risk of returned payments will be eliminated because sending financial institutions immediately verify good funds

5. More secure when it comes to authentication of payments

6. Gives customers more control over cash flow

Given below are the five categories of real-time payments:

Source: Deloitte

Since the beginning of 2016, there is already a set of companies piloting or launching their real-time and instant payments systems.

1. FIS and The Clearing House Real-Time Payments

In April, FIS and The Clearing House partnered to launch a pilot of the first-of-its-kind, real-time payments system available to all financial institutions nationwide. The solution will initially focus on bill payments and will use FIS technology operating via the TCH real-time payments platform. The solution is already under development and is scheduled to go live in Q1 2017 to bring payments that clear and settle in real time to the pilot financial institutions. TCH, which owns and operates the system, has partnered with FIS, who will use the system to develop innovative new services and eventually connect its financial institution clients.

“This is a critical initiative, designed to transform the payments landscape in the US,” said Anthony Jabbour, Chief Operating Officer, Banking & Payments, FIS. “The Clearing House asked FIS to lead this pilot program and we’re honored to play such a pivotal role. Our position further highlights FIS’ leadership and capabilities in advancing a modern payments system.”

2. Early Warning, Bank of America and the U.S. Bank Real-Time P2P Payments

In March, Early Warning, the company focused on real-time payments, authentication and risk mitigation, announced that Bank of America is processing real-time P2P transactions through Early Warning’s clearXchange network. Bank of America is one of the first banks to go live along with U.S. Bank. Customers at both banks are now able to send eligible real-time P2P payments to customers at either bank, with funds made available for use. The solution is unique in its ability to provide consumers with immediate access to funds, directly in their bank account.

Real-time P2P payments are processed in two simple steps. First, after enrolling in their bank’s money transfer program, a customer initiates a P2P payment through online or mobile banking channels using a qualified recipient’s email address or mobile number. Second, a payment notification is sent to the recipient and funds are made available for withdrawal using any channel, including in the branch, at the ATM, with a debit card, at a point-of-sale, or more. Consumers’ account information is not shared and fund transfers are protected by the bank’s’ comprehensive authentication and fraud prevention tools.

3. Icon Solutions’ Instant Payments Framework

In April, Icon Solutions, the independent IT payment consultancy and specialist technology provider, has announced the worldwide launch of its Instant Payments Framework (IPF), a software product that expedites financial institutions’ transition to instant payments. The company has designed the solution specifically to meet the needs of national banks and global bank subsidiaries who regularly find the cost and complexity of current payment hubs excessive.

“With real-time payment schemes going live all around the world, instant is quickly becoming the ‘new normal’ for global payments,” said Tom Hay, Head of Payments at Icon Solutions. “Banks of all sizes who have yet to make the transition are under extreme pressure from consumers, businesses and regulators to provide real-time payment services. Any further delay risks customers walking away and opens the door to faster moving competitors, especially challengers that aren’t burdened by legacy systems.”

IPF incorporates open-source technology with existing core banking and back office applications. The framework includes an extensive library of pre-built services and can be rapidly connected or extended to suit specific business needs. By extending the life of current systems rather than adopting a ‘rip and replace’ strategy, business risk is reduced and the investment required is significantly lower.

4. LiteForex and Skrill 1-Tap System

In May, LiteForex, a forex brokerage, announced the adoption of the 1-Tap system from online payment wallet Skrill. Credit card or Skrill account owners can now make a deposit into their LiteForex accounts with the 1-Tap system from Skrill. Just by selecting a deposit method and specifying the amount, the account owners will have funds available in less than a second.

In case users have several cards and a Skrill account at the same time, they will be offered to choose a priority deposit method when using the 1-Tap system for the first time. Then the system will store preferences automatically. While user-friendly, Skrill 1-Tap promises to meet the latest security standards regarding E-money services and is regulated by the Financial Conduct Authority.

5. EBA CLEARING’s pan-European Instant Payments Platform

In April, EBA CLEARING announced that close to 40 financial institutions operating across the Single Euro Payments Area have committed to supporting and funding the development and implementation of its pan-European instant payment platform. The funding institutions will be involved in shaping the system design, functionality and interface specifications. The future infrastructure service is scheduled to go live in Q4 2017.

The EBA CLEARING solution will provide a real-time payment processing facility, which will be available 24/7/365. Payment service providers from all over Europe will be able to use this highly flexible solution for any payment product that complies with the instant payment scheme being developed by the European Payments Council.

6. Nacha Payment Innovation Alliance:

Launched last year, the alliance is a membership group of more than 200 member organizations from throughout the payments ecosystem and around the globe that encourages industry dialogue and collaboration to help advance domestic and global payments.

“Real-time has the potential to drastically change the way consumers and businesses make payments and interact with their financial institutions” – George Throckmorton, Managing Director, Advanced Payments Solutions at NACHA.

The alliance has been discussing on topics such as real-time and faster payments initiatives such as Same Day ACH, a new amendment to the NACHA Operating Rules that will move payments faster on the ACH Network and can serve as complementary functionality to any real-time payments system that is implemented in the US.

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