Real-time payments coming to US
For years, America's payments infrastructure has been like an audio cassette - it may be reliable, but it lacks the modern features it needs to stay relevant. Now, adding something as revolutionary as the track-skip to our dated cassette tape, The Clearing House (TCH) is bringing real-time payments to the U.S.
A new national network
The new payments network will eventually connect every bank account in the country, giving consumers, businesses and governments alike the ability to make and process payments instantaneously, eliminating delays of what can sometimes be several days between when a payment is requested and when the funds appear in the recipients account.
After months of reports that TCH was developing such a network alongside UK-based VocaLink, Forbes confirmed earlier this month that the system will be up and running in its early stages before 2017. At that point, the network will be able to grow as quickly as individual banks are able to connect their systems to the network.
"Time will tell how the network handles security or risk."
Security in real time
With many of the details still unclear, only time will tell how the new network will handle factors such as security or risk assessment. However, many payment organizations have already given serious thought to how these tasks could be carried out in a future real-time system.
One of the most well-developed methods comes from the Payments Innovation Alliance, a membership program of NACHA — The Electronic Payments Association. The process they describe involves separating the authorization, posting and settlement stages of each payment. When a payment is initiated, authorization and posting occur in real-time, making funds instantly available to merchants. Settlement, on the other hand, is deferred. This process is invisible to the end user, but allows participating banks to reduce their costs while controlling risk through a series of guarantees.
If TCH and VocaLink can successfully balance the consumer and merchant need for speed and security without forcing banks to incur significant risk, this network could have a profound effect on the way we all get paid.
