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"A lot of banks are just a lot more confident with integrat- Fiserv built a gateway, called NOW, that supports access
ing with the Fed," said Tede Forman, president of pay- to real-time payment networks. The company describes
ment solutions at Jack Henry. They already have master NOW as real-time money movement "beyond the point
accounts at the Fed, which makes settlement easier than it of sale." Initial applications have included bill payment,
would be on RTP, which would require establishing some person-to-person and account-to-account (A2A) transfers.
kind of settlement account with TCH.
At last count, 312 FIs were active on RTP. All of those FIs Consumer demand will dominate
are receiving payments; far fewer are sending payments Research shows consumers and small businesses alike are
across the network. "Sending is a lot more complex," Rid- eager for real-time payments. Grand View Research esti-
dle said. While 312 may seem a small number compared mated the global real-time payments market totaled $13.55
to potential FedNow users, those FIs account for 65 per- billion in 2021. Researchers there expect that total to grow
cent of demand deposit (checking) accounts in the United at a combined annual rate of 34.9 percent through 2030.
States, according to TCH.
A 2021 survey by the Fed found nearly three-quarters of
"Any bank or credit union that wants to can join RTP," said micro businesses and 60 percent or more of larger busi-
Russ Waterhouse, executive vice president for product de- nesses believe real-time payments will help them better
velopment and strategy at TCH. Most do so through third- manage cash and working capital. And 54 percent percent
party service providers; only about 20 banks have direct of small and midsize businesses surveyed by Ingo Money
connections to RTP, he said. in 2021 said they would pay a fee to receive instant pay-
ments.
In the fourth quarter of 2022, FIs used RTP to move 49 mil-
lion payments valued at $22.7 billion, a TCH spokesman The Boston Fed published an analysis in February, sug-
said. He added that both the volume and value of pay- gesting lower-income households could save billions of
ments sent through RTP are growing in excess of 10 per- dollars a year in overdraft fees if they received money (like
cent, quarter-over-quarter. paychecks) instantly and in turn paid billers instantly.
Are the ACH's days numbered?
"I think that's where it's going to play well first," with con-
Think of FedNow as Venmo meets the automated clearing sumers, said Russ Waterhouse, executive vice president
house (ACH) network, except there's no lag between the for product development and strategy at TCH. "It gives
transfer request and posting of a transaction as the money consumers more control over their finances."
moves from bank account to bank account in real time.
Some experts expect real-time payments to undercut the Also illustrating consumer demand for real-time pay-
need for the ACH, which is a store-and-forward network ments, a 2020 survey by the consultancy Aite-Novarica
with transactions settled at different times during the day. found 88 percent preferred to make A2A payments in real
time. Even more telling, 74 percent said they would switch
"The traditional ACH will be dead once RTP and FedNow accounts to a financial institution that offered real-time
are fully operational," Tim Astanov, vice president, prod- payments if their FI did not.
uct, at TabaPay predicted. In 2022, the ACH network car-
ried 30 billion transactions valued at $76.6 trillion, accord- Bill payments are expected to dominate the migration of
ing to Nacha, which manages the ACH. transactions to real-time networks. "Bill-pay is a signifi-
cant use case for consumers and small businesses," Riddle
Wire transfer volume could dissipate, too, Astanov sug- said. But there are other obvious use cases. "The use cases
gested, given the ease and speed with which transactions we're seeing on RTP are pretty compelling," Waterhouse
will be completed using RTP and FedNow. added.

Forman offered a similar assessment. "Over the next three The top four use cases on RTP are digital wallets, A2A
to five years you're going to see a lot of [the] displacement transfers, instant payroll and earned wage access (where
of other types of payments," he said. "We really think this workers can access a portion of already earned wages),
[real-time payments] will bolster deposit acquisition, pay- and gig economy pay (think Uber drivers and Grubhub
ment orchestration, and competition in the payments in- payouts).
dustry at large."
The card networks are doing something similar, Water-
A small army of financial technology firms has brought to house noted. Both Mastercard and Visa offer push-to-card
market solutions that make it easy for FIs to link to real- payments, known as Mastercard Send and Visa Direct,
time payment networks. "The biggest challenges to finan- that are especially popular with gig workers. The two
cial institutions involve the technological and operational companies use their proprietary networks to move funds
complexities of setting up connections and maintaining from one person's (or company's) bank or mobile wallet
settlement accounts," Jain said. That's where the core pro- account to a payee's debit card account, usually in a matter
cessors and other technology providers come in. of minutes or hours.

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