AUSTIN, Texas -- Corporate practitioners gave their perspectives on The Clearing House’s Real Time Payments (RTP) initiative during two sessions Monday at Faster Payments 2017. All in all, corporates are interested in using the service, but there are some significant questions about how much of an investment they’d want to make in it, as well as the operability of the service itself.
Charles Ellert, head of payments strategy for Verizon, began by saying that his organization is very interested in real-time, but it’s about more than just the payment. “Verizon is concerned about a few key things: ubiquity, efficiency, security, ensuring that there’s a legal framework around things—as well as speed,” he said. “The governance process is also very important for us, because as the systems evolve we want to be part of that evolution.”
But that doesn’t mean speed isn’t important to Verizon; on the contrary, it would make a lot of things easier for the telecom. Verizon hears frequently from customers who are dissatisfied about a lack of transparency in their payments, as well as confusion over whether their payments were actually received. Additionally, a real-time system would help customers who are late on payments avoid extra charges. “Operationally, when you process 50 million payments a month and you have a lot of settlement risk with the existing ACH systems, you want to see real-time account clearing and settlement,” Ellert said.
In a separate session on faster payments from a working capital perspective, J. Dennis Humble, director of treasury services for Humana, noted that he also has his eye on RTP for customer-to-business payments. “We look at it as a new way for folks to pay us. We don’t want to turn down any legitimate opportunities to have third-parties pay us—members who owe us money, groups who owe us money for premium coverage, etc. Especially the groups—they’re going to push us more than the consumers,” he said. “It’s something we’ll have in our suite down the road.”
For its part, Verizon is piloting RTP in the coming months both for consumer-to-business and business-to-business payments. On the C2B side, Verizon is piloting the service for expedited bill payment. The telecom plans to use it for more high-risk customers who tend to pay late.
For B2B, Verizon will also be testing RTP for some of its suppliers, many of whom are small businesses that tend to pay by wires. “That’s costly for them,” he said. “I can’t imagine a small business with a $200 or $2,000 bill paying a $25 wire fee. But they do.” But with RTP, suppliers will be able to send a real-time payment to Verizon at a fraction of the cost. “It’s going to allow them to manage their cash flow better, and it’s going to allow us to receive the messaging and payment in a timely manner and we’ll be able to process it easily in our system.
What’s more, if Verizon discovers an error—if it can’t match an invoice to the dollar amount that’s being sent—the company can leverage the messaging to go back and have a dialogue with the supplier. “We can say, ‘Do you want us to apply it to this invoice? How do you want us to handle this payment?’ Today, that process is tedious,” Ellert said. “But with [RTP], we think we can streamline some of that.”
The role of the banks
Carl Slabicki, AAP, CTP, vice president, senior product manager for BNY Mellon Treasury Services and a former corporate treasurer, provided some reality in terms of implementing real-time payments for a corporate. In general, corporate treasury departments simply can’t make big investments when it comes to payments. “Technology resources are very tight within a corporate treasury organization,” he said. “So there are competing resources and you have to prioritize what you’re working on.”
Therefore, it’s up to the banks to offer corporates easy plug-in solutions that corporate treasury functions will want to use. That’s what it will take to really achieve mass adoption, Slabicki explained. “And [corporate] adoption is really going to be one of the critical components here,” he said. “When we look at real-time payments, there’s no big Fed mandate out there that every bank has to be on it and everyone has to use it. This is something that The Clearing House and banks need to work with to make sure it’s enticing so that the value that it adds is really worth the effort of coming on.”
Slabicki added that banks need to look at what corporates are doing today and make it easy for them to get onto RTP once it launches. “If we say, ‘You’ve got to implement an API and give us an ISO 20022 formatted file, because that’s the only way you’re going to use RTP, this will never get off the ground,” he said. “We have to look at how corporates are sending information—through a batch file, most likely—and we have to add real-time payments as another payment type, so they can easily get onto it and start using it.”
However, if banks want to truly be the leaders in this space, they need to get on it. Theresa Press, project manager for Cigna, noted that as of yet, there is a relatively limited number of banks participating with RTP. “So when you think about that and you’re making payments and accepting them, how do you break out the difference between customers you can send payments to in real-time versus those you can’t,” she said. “So then you have establish two different payments streams. So that could be a possible issue.”