BankThink

Why we’re joining the big banks’ payments system

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Customer demand for real-time payments is growing and adopting this technological innovation is not optional for banks.

This is particularly critical for for community banks waiting on the sidelines for the perfect entry point, as the Federal Reserve is considering a new real-time payments option.

However, customers should not have to look to the current nonbank options that offer the promise of speed without the safety and security of insured depository institutions at their core.

Banks of all sizes should be at the leading edge of this change. Access to real-time payments will likely become a deciding factor when consumers and businesses are seeking a new banking relationship. This is why Cape Cod 5 is moving forward to join The Clearing House’s Real-Time Payments (RTP) Network now as opposed to waiting for alternative solutions that may or may not come to fruition.

While the RTP is viewed by many as a “big bank” payments network, it can also be an important tool for financial institutions of all size to retaining as well as to attract customers and deposits. The alternative for banks outside of the RTP network is to risk losing customers to other financial institutions and nonbank solution providers.

Market forces continue to drive and shape offerings available to customers, and real-time payments are no exception. Presently, over half of the demand deposit accounts in the U.S. are connected to the RTP network. It’s anticipated that the network will continue to penetrate the banking system on the path to ubiquity, causing use of the system to rise dramatically.

Even the electronic payments network itself has evolved significantly in recent decades.

When the ACH Network was introduced in the 1970s, it was meant to address a limited number of use cases. A significant amount of innovation in payments occurred subsequent to the introduction of ACH. Likewise, RTP will result in the transformation of payments in the U.S. as the network continues to mature.

An example of an emerging use-case within the RTP is the improvement of faster bill pay, which enhances the customer experience and meets increased demands.

Cape Cod 5 carefully considered the pros and cons of joining a network started by larger institutions. We have concluded that the benefits of moving forward clearly outweigh the risks of waiting. While Cape Cod 5 will continue to monitor the Fed’s consideration of creating a real-time gross settlement system, we are working now to enable the private-sector RTP network at our institution.

Banks cannot afford to wait for the Fed’s decision to play out. And the opportunity to partner with fellow banks carries far less risk than waiting for others to lead the industry into the future.

When it comes to RTP, depository institutions will either ride the wave of innovation that is quickly emerging or wait and watch as this revolution passes them by.

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Faster payments Digital payments ACH Community banking Fintech Consumer banking Federal Reserve The Clearing House Association
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