The business case for high-value real-time payments
The digital transformation of payments promotes an expansive approach to changing the ways companies do business, but the reality so far has been incremental gains, largely due to some restrictions. As a core piece of streamlining sending and receiving payments, RTP payments move with speed, efficiency and certainty. With the increase to $1 million for payments on the RTP network, the same benefits of the previous $100,000 mark can be multiplied. Across industries and organizations, businesses are turning to higher-value transactions with RTP as a way to streamline and optimize payments more – well-beyond an increment.
According to Adam Carter, vice president in the Faster Payments Group at U.S. Bank, “digital-based payments options are all going to look pretty fast when compared with, say, processing checks or paper-based invoicing, but there are so many opportunities for businesses to operate better – truly transform – when they’re leveraging RTP to its maximum potential,” he says, “and there’s a lot more at stake now.”
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With a transaction value maximum of $1 million on the RTP network, treasury, payments and money movement decision-makers might need to consider sooner vs. later in terms of the benefits gained by transferring higher volumes and payment values away from disparate payment types and onto RTP.
“Finance leadership across the entire business payments landscape has to decide, if they haven’t already, how quickly they’ll want to capture all the benefits that come along with RTP,” he says, “but now, with the transaction limit at a million bucks, you have to ask yourself, what can we do now that we couldn’t do before?”
To answer that “million-dollar question,” Carter points to several payments categories and applications primed to take advantage of the increase.
Immediate settlement has obvious value to high-value sellers, but RTP wasn’t a viable option for real estate under the $100,000 limit. Only 4% of U.S. home sales would have fit under the old threshold in 2021.
“In terms of value to the real estate industry, RTP transactions are really in the sweet spot,” Carter says. “For any transaction between zero and $1 million, both the business and their customers are going to benefit with RTP. Sellers expect to walk away with value for their exchange, be it the sale of their home, car or other asset. RTP allows them to know they have been compensated in full, in real-time.”
The higher value threshold for RTP also means that businesses can streamline their payables operations by consolidating disparate or multiple payments in favor of large, one-and-done transactions. When it comes to procurement, Carter used the example of nationally scaled big box retail store supply chains as a relatively easy way to gain efficiency.
“Consider how many semi-trucks are out there on a store’s loading docks every day,” he says, “those suppliers need to get paid and it’s far less expensive for all parties to reduce the number of transactions necessary in the invoice-to-payment cycle.”
High-value payables are also an opportunity to improve the customer experience for business-to-consumer payments. RTP has given insurance companies the ability to deliver emergency funds immediately to claimants who can start spending comfortably without waiting for a check or transfer payment to clear.
Increasing the transaction limit to $1 million gives other industries the same kind of ability to deliver larger lump-sum payments immediately, which can increase speed and reduce stress.
“When larger sums are involved, there’s naturally more concern from the receiver about actually getting the money,” says Carter. “Whether you’re completing a sale, delivering a bonus or commission, or even paying out a legal settlement, the money is visible in the receiver’s bank account right away. So, RTP eliminates that so-called pending anxiety.”
“Corporate and large-scale payments aren’t limited to simply buying things or receivables,” Carter says. “The bottom line for a business depends on their workforce, too. Employees need to be paid, and the trend is that – understandably – they want to be paid faster.” Carter says the example of payroll and disbursements extends across industries. “If one company can pay me faster than another… all I can say is that’s going to simplify the decision for me.”
“Corporate and commercial enterprises who are optimizing money movement with RTP, in terms of both the customer experience and the efficiency gains in operations are likely going to see opportunities to quickly capture the competitive edge – especially early adopters,” Carter says, “but when you look at that opportunity, analyzing the data through the lens of cash management and forecasting, you might actually see how long that advantage could last.”
In a recent commentary in Treasury & Risk, Shailesh Kowal, Vice Chair of Payment Services at U.S. Bank, cited the coupling of RTP fundamentals – including immediate settlement of funds and instant payment notification -- with the RTP transaction limit increase as a “key change” for treasurers and CFOs seeking to optimize payments processes and gain a competitive edge.
“Treasury and finance professionals who understand the prospective benefits to their organization of faster payments are better prepared to stay a step ahead as digital payments evolve,” he says. “We expect RTP to become increasingly embedded in the software that treasury and finance functions use every day, which will allow us all to reimagine and transform the movement of money.”
RTP allows businesses to take control of their money movement and drive transformative innovation enterprise-wide. To learn how real-time payments are changing the way companies do business, visit our RTP® resource page, explore our survey of 1,000 American businesses, or schedule a call with a treasury management expert.
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