As the U.S. payments ecosystem evolves to include immediate payments and immediate settlement, liquidity and 24x7 cash management and monitoring are crucial factors for credit unions to consider.
Participating in immediate payments increases intraday liquidity needs, as adequate cash must be immediately available to fund outbound payments. This produces a challenge in which participants must balance the risk of underfunding payment accounts and the inefficiency created by overfunding accounts. So, before you implement an immediate payment solution at your organization, you must consider how to manage your funding and settlement easily and efficiently in an RTP environment.
When a credit union decides to become a Participant in the RTP® network, it may choose from one of two options to determine its funding model. The RTP network uses a prefunded, real-time, gross-settlement model, and prefunding is held in a special deposit account at the Federal Reserve Bank of New York that is jointly owned by The Clearing House and either the Funding Participant or a Funding Agent (the “Prefunded Balance Account”).
The two funding-model options are as follows:
Funding Participant. This means the credit union will satisfy its prefunding obligations on its own.
Non-Funding Participant. This means the credit union will use a Funding Agent to satisfy pre-funding obligations.
As the first corporate credit union certified as a Funding Agent on RTP, Corporate One can assist credit unions with selecting the “Non-Funding Participants” option. In addition, Corporate One can facilitate the 24/7/365 management of the settlement and funding requirements for real-time payment transactions. These requirements could be overly burdensome for credit unions to administer independently.