Real Time Payment Capability at Mid-Tier Banks Primed For Growth: Survey

Volante Technologies, a provider cloud payments and financial messaging, has revealed findings from its payments modernization survey aimed at mid-tier banks and credit unions in the U.S. with assets between $2.5 billion and $25 billion. The results show real-time payments connections are expected to triple within the year, and cloud-based Payments as a Service (PaaS) are a growing industry priority.

The study, conducted in early 2021, samples a portion of the mid-tier market. It highlights the dire need for improved productivity to support rising payment volumes and the complexity of maintaining multiple payment platforms. The challenges span all payment types, from domestic wire, real-time, and ACH to cross-border payments.

“We are delighted that Volante’s findings confirm the trends that we have been seeing in the last year,” The Clearing House’s vice president of strategic partnerships Keith Gray said. “Over 140 financial institutions are already participating in the RTP network, with more slated to go live by year end. Mid-tier banks are at the heart of the upswing in adoption, as the RTP network provides them with a compelling new service for their customers, and an opportunity to differentiate themselves from their peers.”

“Financial institutions are seeking to streamline their operations to prepare for the eventual prevalence of real-time 24×7 payments and the increased operational complexity this will bring,” said John Farrell, SVP Global Product Management, Volante Technologies. “There is a strong desire for capabilities related to digital transformation, ranging from increased automation to improved reporting and lower operating costs.”

Of all the modernization initiatives planned by respondents in the next year, cloud and PaaS took the top spot, with the replacement of wire, ACH, and other payment systems following closely behind.

Only 22 per cent use a core processor for payment services, with the vast majority opting for a best-of-breed approach, even among smaller institutions. Ease of upgrading to new payments capabilities, better pricing and reporting, and 24×7 operations were important factors in the shift away from the core. Sixty per cent of respondents identified significant productivity challenges due to rising wire volumes, with a similar percentage saying the same about their ACH processing operations.

While only 15 per cent of respondents say their bank is now connected to The Clearing House’s RTP network, about twice as many are planning to connect within the coming year, indicating the number of mid-tier banks with RTP capability will triple in 2022. Of the remainder, most take multiple weeks to onboard a corporate, with 16 per cent of respondents lacking visibility to onboarding performance—a significant underperformance compared to consumer onboarding efficiency.

“While real-time payments are a long-term priority, mid-tier banks are clearly planning to modernize all their domestic and cross-border payments capabilities in the short term,” continued Farrell. “It is encouraging to see that they are increasingly aware that migration to cloud and Payments as a Service is the fastest and most cost-effective way for them to evolve beyond legacy limitations.”

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