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Friday, June 18, 2021

Real-time payments go live in Iowa

The march to real-time payments continues. Westside State Bank, a community bank in Iowa, is the latest bank to bring real-time payments to its customers through a connection to RTP, the real-time payments network developed and operated by The Clearing House. Westside is accessing RTP through Shazam, and Bankers' Bank is providing funding capabilities.

Westside is beginning its journey with RTP by receiving instant credits on behalf of customers. "Every FI starts with that," Steve Ledford, senior vice president of product strategy and development at TCH, explained in an interview. "It's really a prerequisite for sending."

This stepping stone approach to boarding banks to RTP is necessitated by several factors, including the reality that many banks use different back-end processors for different products. "We think most FIs will end up with multiple providers and multiple links to RTP because of the way they put together their product offerings," Ledford said.

Westside's connection to RTP means it now can offer consumers and businesses immediate availability of payments, 24/7/365, with instant clearing and settlement.

A pioneering, independent network

Headquartered in Iowa, Shazam is a regional EFT network (ATMs and POS PIN debit) that also provides core processing services to community banks and credit unions. It was a pioneer of PIN-debit POS payments, and lays claim to being the only nationwide independent, member-owned EFT network, processor and core provider to community banks and credit unions.

Shazam has developed an API that allows any financial institution using it for core processing services to link to RTP via Shazam. Westside is the third community bank to connect to RTP using Shazam, according to Janet LaFrence, vice president at Shazam.

"Our core is certified [with RTP] so we can rapidly onboard core clients," LaFrence said. "Our integration with the RTP system extends and enhances our EFT processing and core solutions with a new set of account-based, real-time payment transactions and related value-added services."

In addition to Westside, Wells River Savings Bank, in Iowa, and First Bank, in Florida, are using Shazam to offer real-time receipt of credit payments sent via RTP. Shazam is also preparing to pilot FedNow, the Federal Reserve's faster payments network, which is slated for general availability in 2023. "We're making sure that community banks get the benefit of faster payments, not just the big banks that own RTP," told The Green Sheet.

Bankers' Bank, is "a bank for bank," headquartered in Madison, Wisc., and serving banks primarily throughout the Midwest.

The RTP connection

"Settlement matters," Todd Koehn, vice president of faster payment solutions at Bankers' Bank, said in a statement announcing the Westside connection to RTP. "Westside's implementation of real-time payments receive shows that any community bank can utilize instant payments to help customers in our 24/7 digital world."

RTP was built and is operated by The Clearing House, which operates networks (ACH, electronic check, wire transfer and real-time) that clear and settle payments totaling in excess of $2 trillion a day. Over 130 financial institutions currently are moving payments across RTP, including some of the largest banks, like Bank of America, Citibank, JPMorgan Chase, U.S. Bank and Wells Fargo.

Other core processors connecting to RTP include FIS, Fiserv, Finastra and Jack Henry. RTP charges a flat fee of $0.045 per credit transfer. A request for payment transaction (common with billers) costs $0.01, Ledford noted, adding that RTP's fees are "very cost-competitive with same-day ACH" payments. Plus, there are no implementation or monthly fees. "Our pricing is very simple," he said.

Ledford added that "Shazam's technology and Bankers' Bank funding agent expertise are very helpful when it comes to bringing community financial institutions of all sizes onto the RTP network."

POS and merchant funding uses cases

Looking forward, Shazam plans to provide links for its EFT network clients to RTP. "We have thousands of EFT clients, and we plan to offer this to them," LaFrence said. "There are some really good potential use case out there."

For example, Shazam is working on a plan to support clearing and settlement of QR code-based payments via RTP. QR payments are initiated by scanning QR codes from mobile apps. "We will probably be doing that in a sandbox environment soon," LaFrence said.

RTP can also be used to support faster merchant account funding, LaFrence said. Currently, most merchants receive funds from credit and debit card payments via the ACH. "With the ACH, merchants have to wait one to three calendar days to get their money," LaFrence said. "With real-time payments [banks and acquirers] can provide daily merchant payments."

One of the first merchants benefiting from faster payments supported by Westside is a hairdresser in Iowa, LaFrence noted. "They are getting payments to their merchant account every day, including weekends and holidays," she said.

end of article

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