First Step Toward Real-Time Payments: Clear Up the Confusion

By July 20, 2016Bitcoin Business

Two powerful forces are pulling the U.S. banking system toward real-time payments through the nationwide automated clearing house system: Banks’ regulators and the evolution of digital technology.

Already, consumers, businesses and governments expect the delivery of everything – information, goods and services, and money – in real time wherever they happen to be. However, banks are deeply rooted in processing transactions in batches, which slows down payment speeds. They’ve built their payments operations and technology infrastructures around delayed clearing and old-school settlement of transactions.

In order to understand how to update their technology to offer real-time payments through the ACH system, banks first need to demystify a complicated topic that has led to rampant confusion.

Banks across the country and of all sizes are struggling with the concept because they handle a wide variety of payments – from paper checks to wire transfers – that require different policies and procedures. In the case of traditional ACH payments today, a bank will settle funds with another bank first, which can take some time to complete. Then, the funds are cleared to the recipient’s account. The total process usually takes one to three days from the file delivery date.

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In simple terms, real-time payments models work effectively when settlement occurs more frequently throughout the day, or better yet, when settlement occurs in real time. For example, in the United Kingdom, settlement occurs four times a day for same-day payments. If a payment is initiated at […]

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