The Research Project
Starting in the fall of 2022, CU*Answers began studying the evolving world of payment processing, specifically the RTP® Network (The ClearingHouse) and FedNow® (Federal Reserve) programs, and third-party partners who may be able to help us hook into these systems in order to receive funds for our credit unions on behalf of their members. Our goal was to understand the scope of potential projects, who we could partner with to connect, technical details about how the process works, and potential implications for fraud management.
Remember that these are payment options in addition to regular ACH. Whatever we do with these new payment channels will have no effect on our current ACH processes and functionality.
What We’ve Learned
In September and October we met with representatives from both Corp One and Vizo to get a brain dump on what they know about both FedNow® and RTP® and what their respective organizations have been doing. Based on these early conversations it’s clear that the RTP rail (via The ClearingHouse) is further along the path where we could start looking at an actual development project.
Some key takeaways from our conversations:
- These aren’t just faster ACH – there’s a completely separate payment rail.
- The front-end user experience is different from the rails:
- The front-end is where the instructions are entered by the business or consumer, the rail is the back end that actually moves the money.
- A CU must be a participant on a rail in order for the front-end experience to be able to use that rail on behalf of the CU’s members.
- The front-end experience might actually use multiple rails. For example, Zelle, PayPal, Venmo and the like are just front-end apps that allow payments to be made via various rails, including RTP – but using those does not put a CU on the RTP rail. However, once the CU is on the rail for receiving payments, members will be able to choose their credit union account when using those apps to request money to be deposited money into their credit union accounts.
- Per Corp One, 250+ FIs are using the RTP rail now, only 45 of which are credit unions.
- RTP is a credit-push model only – can only send credits (no pulling money from someone’s account).
- RTP requires a core-to-core connection (one FI to another FI) so money can be sent from one consumer to another, or from one business to another business or consumer.
- Similar to a wire, payment is final, instantly settled and confirmed – once the money is sent, it’s gone.
- There are three transaction types: Receive, Send, and Request a Payment.
- A Receive does not require the FI to build a front-end experience, nor is there any pre-funding requirement (the CU doesn’t need to set up an FRB NY account).
- CUs must be able to receive up to $1 million in a single transaction. If the account number in the deposit is not valid, a message is sent back to the sender and the transaction is cancelled; the CU doesn’t have to do anything.
NOTE: We are still monitoring progress on the FedNow® product, and have started planning for hooking into this network. That will be a completely separate project: watch the separate FedNow® Kitchen Recipe for details.
#1: RTP Receive
Our first project will be hooking up a solution for RTP, starting on the Receive side, so CUs can receive payments via RTP on their members’ behalf. We are working with Corporate One and their solution to start.
Status as of September 2023: Project #60155 is in testing and we are already working with our selected beta players to launch during October and November. NOTE: The Clearing House does have an implementation freeze starting mid-November through the end of the year, during which they will not launch any CUs live. However, during that period CU*Answers and Corp One will still be processing paperwork and queueing up CUs for when the freeze is lifted, so you can still sign up to get in the queue!
#2: RTP Send and Request a Payment
When it comes to the Send and Request a Payment sides, we are still in the very early study phases. This will likely require us to build a new front-end experience, from the ground up, including all of the rules to govern how payments can be sent. What we are asking CUs to do now is think about what they would want those rules to be. Remember – once the money is sent, you can’t get it back. What is your risk tolerance and what controls would you want in place?