What

The Clearing House is a US-based banking association and payments company that is collectively owned by the largest US-based commercial banks. The Clearing House operates major payments rails in the US, especially ACH, wire payments, and its RTP network.

Why

According to Rusiru Gunasena, Senior Vice President of RTP at The Clearing House, real-time payments—including their cross-border implementation—represent a huge shift in institutional operations. “We didn’t have a 24/7 mindset until real-time payments came,” Gunasena said, noting that many banks’ traditional cores go dark at the end of the day for EOD processing.

In part, demand for instantaneous payments both domestically and internationally stems from changes in customer experience. “We are all shifting to a very instant gratification,” Gunasena said, citing quick deliveries and text messaging as two such examples.

The Clearing House has led the charge in moving toward RTP because the US regulatory landscape isn’t as centrally mandated as in many other economies. Industry leaders have come together to move the needle instead, according to Gunasena, encouraging a consortium like The Clearing House to build out instant payments rails in the US.

How

Gunasena said that fintechs and FIs moving to real-time payments will be able to sustain a greater range of use cases. For example, they can more easily assist gig-economy platforms and their workers with instant payouts, including, potentially, internationally. This suggests that these organizations should prepare for an operational and staffing shift that reflects its more diversified use-case capabilities over time.

This operational shift can happen gradually to reflect technological transitions. Intelligent routing can let fintechs and FIs move away from more traditional technologies over time, gradually building out RTP bandwidth and then dropping legacy rails once RTP capacities meet volume size. “It doesn’t have to be a flip of a switch,” Gunasena said.

To make real-time payments a success, Gunasena encouraged market leaders to solve for collaboration. Gunasena even mentioned FedNow, the other major RTP network being built out in the US, as an example of a project that merits expert and industry support. The Clearing House and FedNow will have to collaborate on fraud mitigation and other core operational concerns, Gunasena said, as it’s “a win-win for everyone” when these rails work securely and seamlessly.

That fintechs and banks are increasingly entering partnerships with each other will help RTP evolve, Gunasena said; The Clearing House is looking into changing some of its own operations to let these partners test their platforms or products in real time on the RTP platform. The Clearing House is also committing to international cross-border (IXB) functionalities, connecting RTP to other real-time payment systems, and functioning as the switch to orchestrate payments across immediate payment systems.

This cross-border payments solution is in line with G20 visions for IXB, especially as it relates to exchange rates and fees, and is also largely aligned with ISO 20022 standards. And, rather than going and trying to implement RTP systems in every country, The Clearing House is looking to connect and simplify how various domestic payments rails interact, and making sure that these connecting mechanisms align with G20 goals as well.