Innovation

Receive-Only – A Simpler First Step to Real-Time Payments

By: Lou Grilli, Senior Innovation Strategist, PSCU

Real-time payments (RTP) is gaining traction in the U.S. as more financial institutions (FIs) enable their Direct Deposit Accounts (DDA) for this first new payment format in over 40 years. However, at present, The Clearing House’s RTP Network of participating financial institutions shows that less than 10 credit unions in the country are certified for RTP, with several more in queue for implementation. While some credit unions have a faster payments strategy, many are sitting on the sidelines. A few of the reasons frequently cited for not participating in RTP are: 1) lack of resources; 2) cost and effort of core integration; and 3) lack of member demand. Credit unions, just like any business, have finite resources and multiple demands on those resources.

Some credit unions that have made the decision to implement RTP believe that not participating leaves them vulnerable to competition as this game-changing technology takes root among other FIs. Others see RTP becoming a necessary offering, but are choosing to wait on the sidelines until there is more ubiquity in the market, more use cases, or for the Federal Reserve’s RTP platform (FedNow) to become commercially available in 2023 or 2024.

How Receive-Only Can Help Credit Unions Get Started with RTP

If your credit union is delaying the decision to implement RTP due to a lack of resources, or the cost and effort of core integration, a simpler step you can take to get started is by implementing receive-only capability.

A full send and receive implementation for RTP involves integration with a digital member experience (online, mobile or both), significant changes to core capabilities and a liquidity management function that is much more complex than that of Automated Clearing House (ACH), given that RTP payments are 24/7/365 and require changes to critical back-office systems such as the contact center, dispute resolution and fraud prevention.

Unlike a full send and receive implementation, receive-only requires no changes (at least initially) to the digital member experience, significantly less core integration, minimal changes to liquidity management, and little to no changes to critical back-office systems. And yet it gives your members the valuable ability to receive RTP, improves the perception that your credit union is competitive technologically and prevents real-time deposits from shifting to FIs.

An article published in CU Management gives five reasons why credit unions need to offer their members RTP, including payroll and disbursements. The great thing about implementing receive-only as a first step is that credit unions can fulfill these five reasons. It’s even conceivable that a credit union can offer receive-only and not attain full capability for several years or more. What matters to members is that they get their money faster, and what matters to credit unions is that they are meeting their members’ needs.

This brings us to the third reason cited for credit unions not wanting to offer RTP – lack of demand. If you ask a member, “do you want real-time payments?” it is likely they think they already have access to RTP. For example, when they send money in Venmo and the other party receives an immediate notice of payment, that gives the perception of a real-time payment. The actual settlement of funds from the sender’s account to the recipient’s account may take days, but that fact is usually hidden, unless the recipient tries to immediately spend that money.

A conversation occurring more frequently is when a quick-service restaurant (QSR) chain or gig-economy delivery company asks an employee if they wish to be paid instantly at the end of their shift, rather than wait for the next pay cycle. Then the awkward part of the conversation happens when that person is told their FI isn’t set up to receive RTP. The gig worker or QSR employee probably will not request this of their credit union. Instead, they may open up an account at an FI that allows them to get their paycheck when and how they want.

While not all credit unions have members in this demographic, RTP is inevitable. Receive-only is a strategy and a solution for credit unions to take that initial and critical first step to offering RTP to their members.

Lou Grilli is a senior innovation strategist at PSCU, tasked with building and shaping a superior payment and member experience capability for PSCU and its Owner credit unions. Grilli’s long career in payments includes product management, product development and thought leadership in credit, debit, loyalty, mobile payments and digital wallets. He has spent the last six years in roles dedicated to the credit union industry.