The Clearing House’s RTP® network is gaining traction, with 70 percent of demand deposit accounts (DDA) now having access to real-time capabilities via banking technology providers connected to the network. We recently talked with both a financial institution and core provider that have completed the implementation process to get a glimpse into how it works.
A Bank’s Perspective
We first sat down with Christopher E. Richards, Executive Vice President and Chief Banking Services Officer for Cape Cod 5 to learn what led to the bank’s decision to connect to RTP services through its core provider, Jack Henry.
Richards framed the bank’s decision within the broader context of the bank’s payments strategy:
We look at payments as one of the most important services we deliver and offer, particularly going forward. Traditionally in banking, the account has been the center of the relationship. Now, it's really becoming more about payments. If we don't stay up on what's happening in the payments industry and remain relevant from a payments perspective, we run a big risk of being disintermediated.
Although there were several different core providers Cape Cod 5 could have partnered with for connectivity to RTP, it ultimately went with its core provider, Jack Henry. According to Richards, the connectivity and implementation process was “surprisingly simple” because Jack Henry provides seamless connections to the RTP network through its JHA PayCenter™ payments hub. The JHA PayCenter, which launched in Nov. 2018, is a proprietary hub that provides streamlined, secure payment capabilities for sending and receiving payments, including near real-time and real-time payments.
Cape Cod 5 signed contracts with Jack Henry in the spring of 2020 and went live on RTP in September 2020. From a contextual perspective, only 30-40 financial institutions are live on the network, and Cape Cod 5 is one of the first banks to sign on. Although it is still early in the process, Richards had nothing but positive things to say about the implementation process, describing it as “virtually seamless and a small lift relative to the benefits we will be receiving over time.”
To go live, the bank had to become a member of the account at the Federal Reserve and complete and provide other documentation. Still, Richards describes the process as “relatively painless in terms of making it [RTP] go live.”
Richards emphasized the importance of doing your homework and thinking about the decision's long-term implications. Richards said that for Cape Cod 5, the decision was clear:
We knew we wanted to be connected to the system because we see RTP as really becoming table stakes in terms of FIs needing to be connected. So we looked at options to connect.
Currently, Cape Cod 5 is only receiving payments via RTP. Once the “send” feature (not yet available on the JHA PayCenter) and “request for payment” (not yet available) features go live, the bank will have to adhere to network mandates and regulations, as well as follow more robust policies and procedures related to sending funds on the network. A TCH pilot for enabling RTP’s send feature is set to launch in November 2020.
The “request for payment” feature, however, is even more complicated and includes onboarding merchants and corporates who want the ability to request payment for their customers. Participating banks will also have to integrate the new capacity into the bank’s digital banking app. Once everything is in place, there are many use cases for the network across the payments spectrum.
According to Richards, Jack Henry provided support to Cape Code 5 throughout the implementation process, which helped make the process seamless from start to finish.
JHA PayCenter
Jack Henry echoed that sentiment and offered a glimpse into the implementation process from their perspective. We spoke with Tede Forman, Head of Consumer and Commercial Payments for Jack Henry & Associates. After hearing from Richards how seamless the process was, we wanted to learn more.
Forman highlighted the pivotal role the JHA PayCenter plays in the implementation process, the goal of which is to ease the burden for participating financial institutions. Here’s what he had to say:
The JHA PayCenter is a payments hub designed to facilitate access for our financial institutions to the RTP and Zelle® networks as well as FedNow(SM) in the future and other real-time payment networks. It is designed to offer a turnkey solution by centralizing all of the necessary functions required by financial institutions to implement real-time payments and the 24/7/365 transaction flow.
Jack Henry, through its JHA PayCenter, streamlines the implementation process by "doing all the work on behalf of the financial institution." Jack Henry performs all of the technical heavy lifting and provides training and white label marketing materials. The company also provides a single point of contact for the implementation process.
When partnering with Jack Henry, the average implementation timeline for RTP connectivity is 45-60 days. That includes information gathering, planning, and connecting with the network and digital platform configuration. Training, testing, and back-office support is also provided.
Forman says there are now two ways to connect to RTP—independently or through a third-party provider like Jack Henry. When going it independently, the implementation process requires a multi-million-dollar investment in the hardware and software, can take anywhere from 9-12 months. And the ongoing, required updates must also be implemented
Partnering with Jack Henry reduces the implementation period down to two to three months and significantly reduces the capital investment and need for ongoing support. They also take care of all the ongoing compliance mandates. For financial institutions connecting to the RTP network, Jack Henry’s solution is materially more cost effective and efficient near- and long-term.
During our conversation, Forman shared that Jack Henry is preparing for the launch of FedNow in 2023-2024 and working closely with the FedNow team as they finalize their initial requirements. “We’ll probably be one of the first to go live so when financial institutions want FedNow, and we’ll be ready to support them with the same seamless network connectivity.”
As financial institutions wait for the roll-out of new RTP capabilities and FedNow, it’s important to develop a real-time payments strategy that identifies the best payments solutions for that strategy.
What about you? How does real-time payments through the RTP network fit into your payments strategy?
Great news! NEACH provides sessions to help you take a deeper dive on all things faster payments. Our “Payments Professor” content offers both “Real Time Education for Real Time Payments 101” and “RTP Risks, Rules, & Regulations,” in addition to our “Building Blocks of Faster Payments” series. Visit NEACH’s Innovating Payments website to learn more and to register for these sessions.
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