RTP - Wrestling with Milestones

Episode Summary

In this episode of Wrestling Payments, host Joe Casali from NEACH sits down with Rusiru Gunasena, the head of the RTP network at The Clearing House, to dive into the evolution and current state of real-time payments in the U.S. Rusiru highlights the journey of RTP since its launch in 2017, emphasizing its growth and the increasing adoption among financial institutions. He shares insights on the network’s milestones, including handling billion-dollar days and expanding its reach to over 650 institutions, primarily community banks and credit unions.

Rusiru also discusses the various use cases that are driving RTP's success, such as B2B transactions, account-to-account transfers, and instant wage access for gig economy workers. He explains how RTP's real-time settlement and 24/7 availability offer significant advantages over traditional payment methods, making it an essential tool for modern financial transactions.

The conversation touches on the importance of interoperability with other networks, including the newly launched FedNow, and the ongoing collaboration with the Federal Reserve. Rusiru concludes by encouraging financial institutions not yet on board with RTP to start with a receive-only approach to experience the benefits of real-time payments.

Guest-at-a-Glance
Guest: Rusiru Gunasena
What he does: Vice President, RTP Product Management & Strategy
Company: The Clearing House RTP
Noteworthy: Rusiru Gunasena: Leader in real-time payments, overseeing the RTP network at The Clearing House, with extensive experience in payments and fintech.

 Where to find Rusiru: LinkedIn

Key Insights
Real-Time Payments Transforming Financial Transactions

Real-time payments (RTP) are revolutionizing how businesses and consumers handle transactions. With its 24/7/365 availability, RTP allows for instant settlement, eliminating the delays and uncertainties associated with traditional payment methods like checks or ACH. This immediacy benefits both businesses and consumers, ensuring that funds are transferred and accessible in real time. The RTP network’s ability to support high-value transactions, now up to $1 million, opens up new possibilities for various sectors, including B2B transactions, insurance payouts, and instant wage access for gig economy workers.

The Growing Importance of Interoperability in Payment Networks

As new payment networks like FedNow enter the scene, the need for interoperability between these systems and established networks like RTP becomes crucial. Interoperability ensures that institutions and customers can transact seamlessly across different platforms, enhancing the efficiency and reach of real-time payments. While RTP was the first to market, ongoing collaboration with the Federal Reserve and other stakeholders is vital for aligning features and ensuring that the benefits of real-time payments are universally accessible, regardless of the network.

Request for Payment: A Game Changer for Bill Payments

The introduction of the Request for Payment (RFP) feature within the RTP network is set to transform bill payments. Unlike traditional methods where payments might be delayed or susceptible to fraud, RFPs allow consumers to receive and authorize bill payments securely through their bank’s channels. This feature not only enhances security but also gives consumers greater control over their payments, allowing them to authorize transactions only when they are ready. As this feature evolves, it is expected to bring significant improvements

Transcript

Wrestling Payments with Milestones- Rusiru Gunasena
 ep 2.16

Joe Casali: [00:00:00] Hi, welcome to Wrestling Payments. My name is Joe Casali. I'm the host. I'm here today with Rusiru Gunasena. And if I destroyed that, please correct my pronunciation.  please, if you could introduce yourself and what your role is.

Rusiru Gunasena: Thank you, Joe. It's a pleasure to be here with you to talk about payments. You did well. It's Rusiru Gunasena. You did, you very well.  I'm responsible for the RTP network at the Clearinghouse.  We here at the Clearinghouse run three major payment networks in the United States, which is the ACH equivalent called EPN and then the wire equivalent called CHIPS and the latest payment network, which is the real time payment network, RTP. Clearinghouse has been in existence for 170 years, even before the Fed, and when folks exchange gold across the table, that's what Clearinghouse really started off and the history is very rich. [00:01:00] So I'm very much honored to be here, responsible for the RTP network at the Clearinghouse. Before the Clearinghouse, I was with Jack Henry for 14 years.

I was on their bill pay side as well as stood up a real time payments division and a payment hub to connect with Zelle and RTP both.

Joe Casali:  I've heard a lot of good things about that hub, so if you had something to do with that, thank you. It really,  our sister company, NEACH Payments Group, does audits. And when you walk in With Jack Henry, it's like, can I have this? Yep. Can I have this? Yep. Can I have this? Yeah, it's all right there. It's really nice Not about plugging Jack Henry or anything. I would like you, bring one of my questions I was gonna ask about the Clearinghouse and how old it was but you've got you've been the company's been around for a long time, it's seen a lot of change in banking, which is, if you're a payments nerd or geek, it's really interesting [00:02:00] stuff. So today, we're here to talk about what's going on with RTP. Now, RTP, I was on the Fed Task Force that was exploring all these things. They were looking at efficiencies in the system and how can we make the payment systems in general better.

And. Lo and behold, partway through that process,  this upstart comes along known as the Clearinghouse and decides that they're going to enter the industry with a solution. Now that was seven years ago,

Rusiru Gunasena: That's correct.  in 2017. so the RTP network was launched in 2017, and that was the first real time payment network in the United States.

Joe Casali: Which is amazing because in the U S we pride ourselves in being leaders and on the forefront of things. And we were trailing Europe all over this idea. I think, [00:03:00]  I got my dates wrong, but I think Australia was defining a new payment system. And you guys really jumped into it and,  beginnings are really tough.

You were the first company in the U. S. to try this. And today, we're here to report,  you're still around, seven years later.  you hit your first,  And I'm posing these as questions, they may not sound as questions. You posted your first billion dollar day, and you've posted multiple million transaction days.

Do you, do you want to talk about how, where, how far you've come?

Rusiru Gunasena: Yeah, sure. So, starting in 2017, it's the seventh year in existence, so there's been a lot of challenges we have worked through. It takes time to build a two sided network and then certainly hardening the network and the infrastructure and getting also the early adopters onto the [00:04:00] network, making things efficient, efficient to onboard and to get here today.

Rightly, like you said, we have had a billion dollar days as well as over a billion payments a day. We can see the momentum. Which is really month over month, quarter over quarter, the volume and the dollar value of the transactions growing.  If you look at where we started today, we have now over 650 institutions, both banks and credit unions and about 90 percent are community banks and great unions on the network.

Joe Casali: That's, that's excellent, we are a payment association and the core of our membership really is community institutions, so way to go. What do you think, in my mind wanders as I do these things. But if, if anyone was looking at,  the [00:05:00] growth of a network, you guys,  that first payment,  you guys were responsible for it and now you're, you're, you're,  hockey stick is, is going up.

The volume is growing.  Who do you think are the best users of instant payments? And just one second, there are different payments. that are useful for different things, you know? So I, and I remarked on this because over the weekend I had to send money back to my, oh, my sister sent money back to me that I lent her and I use the apps, right?

It was a small amount of money. It was tiny. It worked fine. I can't imagine that's true for a corporate customer or other types of customers. Can you, do you want to talk about that? You know what you're seeing the best use of your networking and the best customers

Rusiru Gunasena: So, like you said, the dollar value and that,  transactions growing, we can see [00:06:00] that the average dollar of a transaction continues to grow. Even a year back, it was probably less than 500. But today, probably, it averaged around three hundred, seven hundred and fifty dollars,  the average transaction value.

So what we see as the use cases is really B2B transactions, account to account transfers,  whether it's,  wealth transfers or businesses repositioning funds. And also high dollar transactions also now,  growing because we increased the limit to 1 million. The network limit is 1 million,  on a transaction.

So you can see,  those high value transactions are also now flowing through the RTP network. In addition to the account to account transfers,  you also see disbursements, which the businesses are paying their suppliers, the vendors.  through our RTP, because it's real time confirmation of that payment. So you, you really, [00:07:00] when the suppliers deliver the goods, you pay those bills and then also insurance payments, property payments are today very prominent.

Another very prominent use case is the earn wage access, instant wage access for financial inclusion, where even employers today advertise to say work today, get paid today, even Uber, Grubhub drivers getting paid. For what they did today, and they have money to pump gas the following day. So those are some other prominent use cases.

We are continuing to work with the corporates and the other, other entities,  banks and credit union customers to look at what the right fit, what's the value proposition of RTP, because there is a lot of education and communication we need to do with the, the, the, the bank and credit union customers to understand what their use cases and how do you, how do they apply RTP? 

In addition to that, [00:08:00] I mentioned the 650 plus number. We also see institutions seeing the value on receipt. So to receive RTP payments, that's a very much of a value add. It helps with the deposit displacement issue they faced where the deposits are sitting in mobile wallets and, and other,  closed loop wallets.

Today, customers and businesses.  even willing to pay to do that drawdown from those wallets into their bank or credit union accounts. That's another,  prominent use case we see the wallet drawdown. So receive,  where the institutions are coming live on a receive first and then enabling send is a very prominent use case as well.

Joe Casali: That's awesome. I I  we have a if you you do a podcast You know that we have a prep meeting and we  do a little mini interview  i'm i'm known for going off script, so Uh going off script a little bit [00:09:00] you mentioned the Notification or the  the confirmation that the payment is there.

I know when I write a check, it goes in the mail. I, when I do it on bill pay, I press a button. I don't know when that's going to hit even, even direct deposit. I, I check, I check my account on payday and make sure the direct deposit went in. Can you talk about how RTP is different?

Rusiru Gunasena: Definitely. So RTP is real time, real time confirmation, real time gross settlement even between the two institutions, the money really moves in real time.  I think like you said, you don't post a check and hope it gets there.  I hope fraudster don't get their hands on a check and then alter that or deposit somewhere else.

I've had a very close look like you, paying your credit card bill with a check and a fraudster can cash. It is  mind boggling to think [00:10:00] when a check is posted to pay your credit card bill that somebody can cash. Right? That has happened. I heard a recent example of that.

And,  so that's what the benefit of real time payments is. It's really,  real time,  confirmation to the sender.  it's irrevocable. It's also then,  settled between the institutions in real time. So those are all message rich because of the ISO 20  real time payments. RTP has the capability to carry additional information in that RTP message as well.

Joe Casali: And, and just to, just to confirm for people, not,  not really,  knowledgeable of RTP or instant payments.   I can, I can send a check that gets there Monday to Friday. Banks are typically open at a certain time. I can go do a [00:11:00] deposit. If there's no time limit. There's, there's no, I can, I can do this anytime.

Rusiru Gunasena: That is correct. It's 24/7

Joe Casali: And it's, it, it doesn't settle on Monday, it, it settles right there. It's available, confirmed, all that. It's very

Rusiru Gunasena: Yeah. Settlement is instant as well. 24/7/365 high, high availability.  if I geek out a little bit, it actually is,  real time across two data centers active. So today people don't hear about certain prominent platforms doing the upgrades and patching and then taking downtime, like,  20 years ago, right?

That's how RTP operates.  It's high availability, active across two data centers.

Joe Casali: And, and again, you, we, we talked yesterday, but you mentioned something just now and it clicked wallets. So,  all [00:12:00] the apps. I think they're great for what they do, the Venmos and the cash apps and,  but,  my, my, my daughter confused the heck out of me. She Carries a balance on her Venmo, which is like, why isn't your money in a bank?

With the system, the money becomes the institutions because it's easy to get it down. Can you elaborate a little bit on that?

Rusiru Gunasena: Sure, I think this was very early on when the digital wallets came, some of the fintech wallets. The institutions saw the money flowing out of the institution accounts and sitting in these digital wallets. And also it depends on the generation. Like you said, your daughter is very comfortable not even going into a bank or having a bank account, no relationship with financial institutions.

Some of the generations predominantly use just a fintech wallet. So their [00:13:00] money sits in the wallet. They transact between that wallet and pay out of that wallet to merchants or their friends and friends pay them into the wallet. So that is very, very much,  what happened,  at the very early stages. So with RTP, what has changed is now you have the capability to do the drawdown in real time.

So the customer or the business can see these wallet funds immediately moving into the institution. Now you have liquid cash. In the institution account where you can now use either pay bills, pay your suppliers. So customers and businesses we see are even willing to pay. Some platforms may charge a dollar,  Up to 5, things like that, or a percentage to do that drawdown, but still beneficial for consumers and businesses to do that drawdown.

So it has helped the institutions, both banks and credit unions with the [00:14:00] deposit displacement, which right? The deposits are moving out of the institutions, sitting in these, and that relationship is what also diminishing because you want the customers' funds in the institution accounts, you want to build a relationship with them.

They, you want them to come to your platform. So that's definitely a TPS help there.

Joe Casali: It's almost like someone warned you about me going off script because you nailed every extra question I would have just asked. The strategy part there is about why, why let that money sit someplace else, bring it back to the institution. Strategy 101. So there is another, there's a competitor in the industry that they were born about a year ago.

 What,  has there been any,  I'm sorry, I'll let you talk. What, what have you discovered,  about FedNow coming online? And,  being pretty aggressive as far as acquiring participants, [00:15:00]  did business go down? Did business go up? What observations do you have?

Rusiru Gunasena: So I will start from my industry days before even joining the Clearinghouse. When I sat on the Jack Henry side,  I worked very closely with the fed from the early days.  help them with lessons learned. What I saw when I implemented,  sitting,  Jack Henry,  the payment hub integrating into Zelle and What I saw when the Fed announced, there was a lot of confusion created in the marketplace. A lot of institutions went into a wait and see mode. What do I do? Do I join the network? Which is there now. Do I wait for the Fed? So it created a lot of uncertainty and confusion. So what really helped,  starting last year was now the institutions can move on, right, and make a decision.

So we saw a renewed interest in RTP when the institutions are now making the [00:16:00] decision to join a network. They obviously joined the network who has been here for seven years. Who got the volume, who got the endpoints and we have seen a renewed interest and you can see the numbers growing on the RTP network.

Month over month institutions are joined. That's one part for sure. The second is really the, the send use cases. So with the endpoints, we have about 98 percent ubiquity because of the major third party processes who have connected already. All the major TPSPs are connected to RTP. Jack Henry, FIS, FISER, when the list goes on, they're all connected to RTP.

Because of that, we have about 98 percent of institutions or DDAs connected to RTP. So it's a case of technically turning them on just flipping switches, not building tech. So that's also a advantage for the institutions, the community [00:17:00] institutions to go talk to their tech vendors, their co providers and say, let's turn on even at least receive only mode and then look at send use cases.

So that is something which is happening as well. We have seen a renewed interest in that, as well.

Joe Casali: So,  for now, and I, I say for now because in my mind, at some point, the networks will go down. Talk to each other. Maybe there is no we didn't talk about that yesterday. There's no plan. I know nothing secret, but my imagination says At some point they got to talk to each other at some point Just like if it was a credit card the same terminal can do a MasterCard and American Express.

They're all different. So Some point I say that and just like I would say to you In 2017, there was that first transaction. FedNow is now experiencing that first transaction. You've been here [00:18:00] seven years. There are players on your network that apply a specific use case. And my, my favorite, and, and I went to a session, maybe three years ago, was this company called Digit.

And please talk about anyone you like, but Digit was really cool because Their solution, they're not a, they're not RTP, they're not Fed, they're not a bank. But their solution was a rainy day fund. And the problem was, when that rainy day hit, and it was a Saturday, and they went to a car dealership to buy the car, they tried to get their money and they said,  it'll be three days.

Sorry. So, so it, it was really defeating that rainy day fund idea, because it was raining, And I couldn't get my money and they signed on. They have a solution with RTP. You can go buy that car on your rainy day and get the money instantly. Do you want to talk a little bit about any other use cases?

But, but you, you have a,  as my, [00:19:00] my boss Sean Carter would say, you have a bench. There's a bench of companies using the network.

Rusiru Gunasena: Definitely. So you touched on interoperability. So I want to start there first. The collaboration which I did in the industry still continues.  Clearinghouse collaborated even before I joined from the early days as well.  sharing the specs of RTP with the Fed. That collaboration continues. We are ready at any point when the Fed is ready to begin interoperability. Generally the Fed has been the first to market and Clearinghouse as followed but in the case of RTP, we were first to market and and the Fed followed so you would hear sometimes even our CEO referred to as that you know it would have been great to have interoperability day one with the The following network, but I think there is, it's not easy to build a network.

We understand they have a lot of work to do and hardening of the network, things like that. So we are [00:20:00] ready. We continue to collaborate on different feature functionality. How do we align the two networks? Because our institutions,  banks and credit unions would like to see some.  compatibility between the two.

So from a product level, we collaborate, I have a great relationship with the Fed. We do that. So I just want to touch on that interoperability, which you touched at the beginning of the question, moving to the second part of the question on the use cases. So you are absolutely right.  some of the use cases, auto loan disbursement.

We can see that you are sitting in a car dealership and wanting to buy a car. And that is a great use case for RTP. You could fund the loan and transfer the funds to the auto dealership in real time. And then you could, you could drive the car out of the lot and, and the dealership has the confidence they got the funds. The other use cases, I think I touched on the, the, the [00:21:00] gig economy workers getting paid. I touched on instant wage access, earn wage access use cases.  Insurance disbursement is also another prominent use case. That's,   you are, you are submitting a claim and you need the funds to get your car repair towed.

And and and repaired, so insurance disbursement is another one property payment. Another one with the limit being 1M now, we see more and more escrow payments and property,  closing payments on RTP well. So those are some of the very prominent use cases. But like I said, we continue to work with the industry,  work with the bank and credit union customers on send use cases.

We are trying to create some playbooks, some material so that the banks and the credit [00:22:00] unions can have those conversations, help them,  show the value proposition and brainstorm on those use cases to bring them on. Because some are existing use cases, some are new. There is a lot of innovation happening on top of RTP as well.

We see that, within institutions, their customers, FinTechs, they're really choosing RTP as the first network right out of the gate. So there are some new innovative use cases as well.

Joe Casali: So,  I don't know if you see me writing here, but, but you keep reminding me of questions to ask.  we, we don't have a ton of time left, but let me, let me try to go through them.  I didn't touch on this, but I know NACHA, NACHA is the ACH Association. They have close to, the closest they get to a, a real time payment, it's the same day, ACH.

They saw a bunch of activity, when they moved from up to a million dollars in [00:23:00] a dollar limit. Did you see, was there any, any bump when, when the, the, the limit changed?

Rusiru Gunasena: Not immediately, it takes some time, but I think over time we have seen that growing. We monitor what the payments are over a hundred thousand and five hundred thousand. And over time we have seen, not necessarily immediately, because sometimes where the technology works, where the limits are enforced even at an institution level or by use case, it takes a little time.

But over time we have definitely seen that the new use cases,  over that limit, have been continuing to grow. That's why even the average dollar value increase on the RTP transactions.

Joe Casali:  All right. I have a comment. And then,  the scheduled last question, which doesn't mean it's the last question.   you mentioned playbooks a minute ago and,  from the [00:24:00] beginning, we've been,  we've been,  an advocate of RTP since the beginning.  your resources have been tremendous. And for anyone looking,  theclearinghouse.

org, RTP is on that site. They have a document center. Anyone can go into the document center. They are very informative, very communicative. There are resources there for anyone who's interested in. Do I, do I want to do RTP all the way to show me the rules? So it's a great resource if you're looking for a resource question.

You, you talked about collaborating with the fed. You've talked about improving the network.  what, what is,  is there a newer application on the, and that's like a loaded question. Is there a newer feature that is just  getting pushed now about real time payments, RTP?

Rusiru Gunasena: I would say RFP request for payment, [00:25:00] in some jurisdictions, it's called request to pay. So a request for payment is really a game changer when it comes to bill payment. Today, it comes through the secure banking channels, not a bill coming through the mail or through email. You could get fraudsters coming in the middle of some of those traditional means of getting a bill and then you send the money to the wrong place.

But when you think about RFP through the RTP network, the request for payment from a merchant comes through. the secure banking channels to the customer. At that point, the customer is in control. It's not like an ACH debit hitting your network and taking the money without your control. You have control.

You control that RFP and authorize the payment because it's a credit push from the RTP side, but you're authorizing that request for payment, agreeing that the amount is correct. I have a relationship. I owe this money to the cell phone company or water company or electricity bill and [00:26:00] then making that payment.

So request for payment. We started with low risk use cases. We took a very calculated approach with a warranty framework in place and now we are in phase 2 of execution of that request for payment journey. So we are. Continuing to add new use cases and growing RFP. So a request for payment is one I would say is one of the new features which is really going to change how we transact,  whether it's consumers or businesses.

Joe Casali: And so if you're new to the industry or new to payments, with an ACH, I can send you money. It's a credit, or I can pull money out of your account. It's a debit for RTP. There's only credit pushes that they're only ever sending a credit. The RFP is an instruction that says, Hey, here's a message through the network that says, here's a [00:27:00] message.

I want you to send me a credit. Send it when you want. I could put a time limit on it. Do you set an amount? Do you, do you let them set an

Rusiru Gunasena: Now you can put an amount in it saying this is the amount due and the request for payment with the amount.

Joe Casali: So it's all teed up for your institution to send the bill. And I always think of this as a utility company, but send the electric bill in, it's, it's really odd and hard to explain. Sometimes I can send you that and there can be a time limit on it. So even though it's over the real time payment network, I can send you the RFP and you decide in the next two weeks when you want to send it.

When you send it, it's instant, but not until you hit that button.  really interesting.  I, there's, there's a lot of buzz around RFP. I know lots of folks are looking at it. Really interesting.  So let's,  one [00:28:00] more topic and I'm sorry, I lied. One more topic.  Pandemic. Pandemic hit everyone.

Were you, you weren't with the Clearinghouse when the pandemic hit. You were still Jack Henry?

Rusiru Gunasena: That's correct.

Joe Casali: What, what did the Clearinghouse see? How was it? I imagine everyone said, I can't get to the office. What, what, what do we do now?

Rusiru Gunasena: Yeah, definitely. I think across the ecosystem, and playing house is not alone, but saw a renewed adoption in digital payments, right?  a lot. We've already digital, but I think a major percentage then moved away. Even some of the folks who are still posting checks or going through traditional means moved over to digital payments.

And then real time in particular, I think the funds were needed,  in, in,  in a more real time,  manner. So a lot of payments moved from even traditional digital networks into real time payment. So [00:29:00] definitely saw that shift,  across the pandemic, into the RTP network, new use cases, whether it's folks doing account to account transfer, disbursement.

I think there were a lot of  needs when the pandemic hit, where the funds were needed in a more real time manner. So,  we saw that as commerce moved to many, many digital channels and delivery methods, people didn't go to the grocery store to buy, or there was no contact. So we had to,  payments were no different.

So payment had to,  payments had to also move into those methods, be real time, no contact.  And, why should payments be any different when Amazon is today delivering your goods the same day or your food is being delivered within minutes when you order it, why should payments be any [00:30:00] different and take hours or days, right?

So that's exactly what we saw through the pandemic. I think there was a behavior in consumer And businesses which shifted,  into that real mind, real time mindset.

Joe Casali:  Excellent. I didn't do any wrestling, who's your favorite wrestler or any of that. But tthis topic is definitely a wrestling repayments topic. So,  it's interesting. We continue to follow it. I think, we'll, we're going to talk to you again when you hit the next record.

I'd appreciate that. Anything I didn't ask or you'd like to share with the audience?

Rusiru Gunasena: I think you hit quite a few good points. I would always,  as a closing would say, encourage,  the, the institutions who are still not on RTP,  to at least join,  because you are technically,  capable of doing that through,  through,  your technology provider or the co provider. So you're missing out, your customers are missing out on [00:31:00] receiving those RTP points.

Payments, at least on a receive only, you should first join, get your feet wet on real time payments, and then start looking at send use. So that's what I continue to encourage,  the thousands of institutions still not joined.  if you look at the number 650, when we have 10, 000 institutions in the country, there's a long way to go.

Joe Casali: Right. No, I agree with you. And, and that's, that's the advice we start,  we tell them,  start with receive, get your feet wet,  and experiment.   Thank you very much. This was great.  I would do this again in a heartbeat.  And, thanks everyone for listening. Click all the buttons, save, like, comment.

 I appreciate it. All right. Thank you.

Rusiru Gunasena: Pleasure to be here.

Joe Casali: Pleasure. Yeah. Thanks.