Three Lessons Learned from Credit Union Early Adopters of RTP
Lou Grilli, Senior Innovation Strategist, PSCU
Currently there are about 150 financial institutions, including all the largest banks in the United States, actively participating in The Clearing House’s Real-Time Payments (RTP) service. Included in this list are 27 credit unions (and counting) who chose to be on the forefront of adoption of real-time payments. After interviewing several of these early-adopter credit unions, a few common themes emerged. First, each one felt that implementing real-time payments, which could loosely be considered the next generation of ACH, was inevitable. While there are credible reasons to wait, such as incorporating the implementation of RTP into a bigger strategy of a core conversion, or a change or upgrade to online and mobile banking, these particular credit unions saw no benefit to waiting.
The second common theme was that members were not asking for faster payments. This seemed like a contradiction. Why expend resources on something that members are not asking for? It’s because members already expected instant payments. Having gotten used to Venmo payments appearing to happen instantly and seeing the ability to move funds from an Apple Cash or Venmo balance back to a bank account instantly, for a fee, has led to the expectation that all payments can happen in real time.
The third common finding was that as soon as the credit union implemented the service, in most cases literally within hours of going live, real-time transactions began posting to the core. And in almost every case, payroll was the use case seen by these credit unions. DoorDash, Uber Eats, and Grubhub were all early adopters of on-demand payroll, moving from a biweekly paycheck to a payout up to several times per day. This was a little simpler for contract employees, but the large payroll providers such as ADP and Paychex are moving to an earned wage access model as well, allowing employees to get paid at the end of a shift, and providing employers with a novel differentiator.
The next biggest use case cited by participating credit unions is account-to-account transfers, specifically me-2-me. This includes transferring funds from your Venmo account, PayPal, or Cash App balances to the member’s share draft account, in real time, and having that money immediately available to withdraw at an ATM or spend on their debit card. It also includes moving money from an account at another financial institution to the member’s credit union account, such as a retiree taking their monthly distribution from an IRA at a brokerage house. These are all examples of me-2-me transfers that members expect to happen in real time. And these transactions are happening over the weekend, on holidays, and in the middle of the night – with the expectation that settlement occurs immediately. That’s what members have come to expect – not waiting a full day or possibly several days to get their own money.