“I feel the need...the need for speed,” says Maverick in the movie Top Gun. He’s not the only one feeling the need for speed these days. The latest innovation in the payments landscape, real-time payments, is constantly being pushed forward by fintech providers, government players, and everyday consumers. The industry’s ongoing payments shift means that it’s crucial for credit unions to include real-time payments as part of their strategic objectives in order to remain relevant and competitive partners to their own members. At this year’s inVest48 conference, three of Corporate One’s resident experts on real-time payments hosted a breakout session where they discussed the benefits of real-time payments along with the cash-management implications and the around-the-clock responsibilities that come with them.
In case you missed it, here are three of the most important takeaways from this session to keep in mind as your credit union considers its real-time payment options.
1 - Faster payments are not the same as real-time payments.
All real-time payments are faster payments, but not all faster payments are real-time payments. For example, some faster payments seem like real-time because of back-end arrangements invisible to users, like Same Day ACH transactions and even online debit transactions. Even P2P payments, generally perceived as real-time, may not, in fact, be true real-time transactions. What distinguishes a faster payment from a real-time payment is that with real-time payments the data is literally moving in real time, and the funds are settling in real time. Everything in a real-time payment is immediate and transparent.
2 - Real-time payments provide numerous opportunities for credit unions to reimagine their business to serve members in enhanced and different ways.
Current payment flows, such as checks, are a fragmented, multiple-step process. Real-time payments improve the flow of payment data and have the bonus of additional information that accompanies each transaction. Real-time payments also allow funds to settle as soon as they route through the RTP network between the sender and the receiver. This instant settlement is incredibly beneficial to the credit union, the members, and especially (for example) small businesses trying to optimize cash management within their overall portfolio.
As a result, there are numerous real-world use cases that are beneficial to credit unions and their members. For example, with real-time payments, credit unions can now make an immediate payment to a car dealership on a Saturday afternoon, which will be instantly confirmed both to the payer and the payee. This is a win-win scenario for both parties and may give the credit union a competitive advantage with that car dealership because the dealership knows they will receive immediate payment from the credit union.
Credit unions can get creative with their payment interactions not only in business-to-business relationships (B2B) with contractors, vendors, suppliers, title companies, vault orders, and more, but also in business-to-consumer (B2C) relationships to leverage RTP in a way that makes the most sense for their credit union. As credit unions apply their creativity to the innovations offered by real-time payments and adopt the business cases that are most relevant to them, they’ll likely improve numerous business relationships and increase their competitive edge.
3 - Becoming an RTP network participant requires credit unions to operate in a 24/7/365 payment environment.
The opportunities offered by real-time payments also require some new ways of thinking about back-office operations. With real-time payments, there are no more batches and no more payment cutoff times because the RTP networks will always be “on.” This means credit unions are required to have 24/7 pre-funding, which requires 24/7 liquidity management.
If your credit union isn’t in the habit of operating 24/7, this requirement can pose some challenges, such as the liquidity implications for payments that move 24 hours a day, seven days a week, 365 days a year. How can credit unions meet their liquidity obligations in an “always on” environment?
Participating in the newest core payments infrastructure in the U.S. in more than 40 years requires a commitment to multiple support structures, and the use of a funding agent is one of those key components that can help minimize the impact on your credit union’s internal resources. A funding agent, such as Corporate One, comprehensively facilitates the settlement and 24/7/365 liquidity management of members’ RTP network participation. This facilitation solves the new problems that are created by the RTP network always being “open for business.”
To learn more about Corporate One’s Funding Agent Service for the RTP Network, watch this short video. And if you’d like to watch the full breakout session on demand, visit our Real-Time Payments Info Center Resources section.