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US TCH instant payments are operational

14 November 2017

The first new payment and clearing infrastructure in the US in more than 40 years is operational, writes Neil Ainger. The Clearing House (TCH) launched its real-time payments (RTP) system late yesterday evening when $3.50 was moved between two different banks in three seconds.

The first ever instant payment on the new system was initiated between BNY Mellon and US Bank. The latter’s CEO Andy Cecere said in a joint statement that he was “excited to complete the first ever bank-to-bank payment using the new RTP system”.

Meanwhile his counterpart at BNY Mellon Treasury Services, Ian Stewart, hailed the beginning of the testing procedure as the start of “one of the most important payment transformation efforts in our industry”.

After the initial successful test run further transactions have been rolled out through the system involving Citi, J.P. Morgan, PNC and SunTrust, who collectively represent the US payment sector’s earliest adopters of RTP. Its operational base is ramping up as we speak. Previously an account clearing house (ACH) transaction involving US banks would have taken many hours, even days to process.

The new RTP system uses technology supplied by MasterCard-owned VocaLink. It was designed and built via the collaborative effort of TCH’s 25 owner banks and adheres to the objectives of the US Federal Reserve (Fed) Faster Payments Task Force, giving the country the chance to at last catch up with other more advanced real-time nations such as the UK, Denmark, Singapore and so on.

RTP is open to all US depository institutions with a goal of reaching ubiquity by 2020, but it will take some time to gain universal adoption. It is hoped that by the end of 2018 half of all American depositors will have access to the system as the big banks migrate to RTP. Large processing firms are expected to serve the connectivity and processing needs of smaller financial institutions (FIs), credit unions and so on.

The TCH system supports fast, irrevocable instant payments, standardised messaging and data carrying capabilities, which mean new services and functionality such as mobile phone number initiation should be possible in the future.

“RTP has the potential to revolutionize the way payments are made in the US,” said Jim Aramanda, CEO of The Clearing House. “Our RTP system was designed from the ground up to be fast, safe, and a platform for innovation that enables banks and credit unions to build products that are more responsive to their customers’ needs.”

According to William S. Demchak, PNC’s chairman, president and CEO – not to mention chair of TCH’s Supervisory Board – the newly operational system positions the industry to meet evolving commercial and consumer needs. “At a time when our clients are asking for the ability to conduct their business with greater speed, efficiency and security, RTP will make everyday financial tasks such as paying bills, issuing invoices, making payroll or settling insurance claims faster, safer and more satisfying.”

Author: Neil Ainger
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