the apples and oranges of the instant payment networks

Instant payments are the most consequential industry innovation since the advent of debit cards in the mid- 1970s. According to Grand View Research, the global realtime payments market is expected to grow at a compound annual growth rate (CAGR) of 34.9% from 2022 to 2030.

the beginning of faster payments

Anticipating the demand for faster payments, fintechs and big techs developed an array of innovative solutions – including many that are household names today – that reinvented consumer and commercial payments. And these modern, experience-driven solutions that move money in the exact moment of need are disenfranchising banks and credit unions.

Recognizing that the demand for instant payments is strong and growing exponentially; that practical use cases are evolving and expanding well beyond person-to-person payments; and that banks and credit unions cannot meet today’s accountholder expectations or successfully compete with the industry disruptors without offering faster payments, a second wave of fintechs developed faster payments networks that enable financial institutions to reclaim their position at the center of the payment experience.

Early Warning Services, LLC developed and operates the Zelle® network, which provides a real-time messaging environment that leverages the debit and ACH networks for settlement. The Clearing House (TCH) owns and operates RTP®, and the Federal Reserve owns and operates the FedNow® Service. These instant payment networks support real-time messaging and immediate interbank settlement and enable the development of new payment products and services.

Anticipating the demand for faster payments, Jack Henry™ developed JHA PayCenter™, a proprietary payments hub that provides seamless connections to these third-party payment networks. With JHA PayCenter, diverse banks, credit unions, and fintechs can expedite time-to-market with faster payments, and materially reduce the financial and operational requirements to develop and maintain their own network connections.

Jack Henry™ also acquired the Payrailz® Digital Payments Platform, which adds the open-loop, real-time person-to-person (P2P) solution Payrailz Pay A Person to our payments ecosystem.

the common barrier to faster payments

According to the 2021 Real-Time Payments Market Insight Report¹ published by Levvel consulting:

• 76% of participating financial institutions believe real-time payments will provide a competitive advantage
• 66% will likely offer real-time payments in the next two years
• 5% do not anticipate offering real-time payments

The Levvel report also cited the lack of understanding and knowledge about the faster payment networks as a fundamental challenge shared by the 47% of the banks and credit unions planning to adopt real-time payments or that have already implemented them.

the big decisions

Banks and credit unions that elect to offer faster payments have two fundamental decisions to make:

1. Proprietary or Partner Network Connections – Every financial institution must decide if it will develop and maintain direct network connections or leverage a readybuilt hub available through a technology partnership. Most financial institutions participating in the Levvel report – 76% – plan to use third-party providers to offer real-time payments based on the significant investments in infrastructure and the expertise required for direct connections.
2. Network/Platform Selection – With Payrailz Pay A Person (P2P), Zelle, RTP, and the FedNow Service already processing millions of transactions year, selecting faster payments solutions can be daunting. Based on Jack Henry’s experience to date, we believe most financial institutions will implement more than one network. For example, a bank or credit union may elect to receive instant payment transactions on multiple networks but initiate send on only one instant payment network based on use cases.

apples and oranges – differentiating the payment networks

To help you compare some of the fundamental network distinctions, we have developed this at-a-glance comparison to help support your network decision(s).

connecting possibilities

Learn more about Jack Henry’s faster payments hub and the Payrailz Digital Payments Platform.

For more information about Jack Henry, visit jackhenry.com.

sources

¹2021 Real-Time Payments Markets Insight Report, Endava (formerly Levvel), October 27, 2020.