Everyone agrees faster payments are a good idea for businesses of every size, but making it happen takes a well-coordinated effort on the part of the banking and payments industry. To make faster payments a reality, three initiatives have been undertaken.
One of these initiatives is led by the National Automated Clearing House Association (NACHA). NACHA is focusing on bringing about same-day funds settlement in the Automated Clearing House (ACH) network, commonly known as Same Day ACH. Currently, ACH funds take a day or two to settle, but the goal NACHA is pursing is to achieve same day settlement in the short-term and real-time payments in the future. Instead of payments settling within hours, true real-time payments will be settled within minutes or even seconds. Fifth Third Bank is taking an active role in the NACHA initiative, while at the same time implementing same-day ACH for our customers.
The second initiative is led by The Clearing House, which is a consortium of approximately 25 of the largest banks in the U.S. The Clearing House began this initiative in 2015, and hopes to rollout a network that would operate between banks and buyers, making real-time payments possible for commercial and personal use. The initiative began in early 2015 and anticipates rolling out a solution by 2017. Fifth Third serves on the board of this initiative and is lending an important voice to the critical work being done.
The third initiative is being led by the Federal Reserve Bank. The federal government wants to set standards for how payments should be modernized in the U.S and has formed a task force made up of 380 representatives from financial institutions, government, consumer interest organizations, non-bank providers, regulators, technology solution providers and trade groups. Again, Fifth Third is represented on the task force, providing regular reviews and feedback. This initiative has set its sights on completing a plan for faster payments by 2021.
Faster Payments Will Require Comprehensive Industry Change
As various solutions for achieving faster payments emerge from the initiatives that are underway, one issue at the top of the list is the need for a network that enables access for all banking institutions and credit unions – from the smallest to the largest. Without comprehensive industry change, the viability of faster payments may be limited. Take for example a small business that wants to use a faster payments system to deliver payroll, but the banks used by some of its employees are not part of the network. In this scenario, only part of the company’s payroll would be eligible to receive faster payments and the rest would be delayed. Obviously, all banks must participate in order to make the promise of faster payments work.
Making faster payments possible will require significant investments from banks. Because the banks will be incurring the cost of these technology upgrades, small businesses will be able to reap the benefits without having to make similar investments. At Fifth Third, we are developing solutions with future integration in mind. Fifth Third Direct, our account management portal for commercial customers, which is accessible from desktop and mobile apps, will fully integrate faster payments options as they become available, simplifying their use by small business customers.
As the market moves toward mobile payments and person-to-business transactions, Fifth Third Bank is playing an important role in helping create the definition and approach to how real-time payments in the U.S. will be built. We are working hard to facilitate significant positive change for small businesses, as well as consumers.