More than 40 years ago, the ACH Network offered an electronic and speedier alternative to check for sending and receiving payments. The network remains one of the most trusted U.S. payment systems for sending and receiving high-volume transactions securely, efficiently, and cost-effectively.

Digital commerce has raised the bar on shopping and methods of payment. Consumers and businesses expect an easy, seamless experience. The payments industry is responding with significant technology investments to continuously transform when, where and how payments are made.

Three payment rails have emerged in global commerce: blockchain, real-time payments via The RTP® Network, and FedNow℠. Each has unique features and applications that could change the way consumers and businesses interact.

“While traditional methods like cash, checks and cards are still used, the desire for flexibility and speed is driving an increasing demand for simplified, transparent, and speedier payments,” says Laura McGortey, Synovus commercial payments and fraud mitigation product group manager. "Not only do these emerging payment rails facilitate around-the-clock commerce, but they do so quickly, giving each method the potential to disrupt and transform multiple industries."

Blockchain is expanding payment options.

Blockchain was designed as a public database in which to record cryptocurrency, such as bitcoin, transactions. Each transaction, between two parties, is added as a "block" to the digital chain and stored as a massive digital ledger. With its inherent transparency, security and flexibility, consumers and businesses are increasingly interested in crypto as a means for lending and payments. “As the movement continues toward digital assets and putting them on public blockchains with irrefutable records of ownership and value, as well as blockchain-based security, the banking industry will follow,” said Zack Bishop, executive vice president of technology, operations, and security at Synovus.1

What you need to know about Blockchain

• Near real-time settlement
  There is no intermediary in the payment process, so the transaction can be settled quickly. However, transaction confirmation times can also vary depending on the cryptocurrency used, and transactions that take place during the peak transaction period take longer to settle.
• Encrypted security
  A hacker would have to alter every data point stored on every node in the network to gain access, a virtually impossible task.
• Irrevocable
  Once transaction details have been entered on the chain, they can't be changed or altered. Consequently, there is no recourse for fraudulent transactions, and transactions aren’t insured by the FDIC.
• Decentralization
  Unlike most centralized records, a blockchain ledger lives as copies on numerous "nodes" or computers. Entries are validated and updated in the ledger of each computer on the network simultaneously.

Real-time payments (RTP) are moving to the mainstream.

The Clearing House's RTP Network is the first new payment rail in the United States in more than four decades. RTP facilitates what appears to be a direct digital connection between two bank accounts to process electronic payments. However, the flow is more like a traditional interbank settlement with real-time connectivity, which is a much faster experience than other inter-bank settlements like ACH. From an internet-connected device, a payer instructs their bank to transfer funds from their account into a payee's account. The payee's bank receives the funds and accepts the payment directly into the account. The transaction is settled and confirmed to both parties within seconds, 24 hours a day, 365 days a year.

RTP combines several digitally inherent features that promise to revolutionize payment methods in the U.S.

What you need to know about RTP

• Just-in time settlement
  Fast, irrevocable payment facilitates just-in-time settlement that can be used for everything from businesses paying suppliers and employees to consumers paying household bills.
• Rich remittance data
  While RTP is a highly efficient payments system, it was built first as a messaging system. Each real-time payment can be accompanied by valuable transaction data and information for easier payment reconciliation.
• Push-payment system
  In contrast to direct debit, the RTP system allows a biller to request funds from customers or B2B parties. This helps eliminate the non-sufficient funds risk associated with other methods like ACH, streamlines the biller’s reconcilement processing, and speeds the clearing of accounts receivable, which can come in handy for B2B payments to key suppliers or when paying late utility bills.
• Irrevocable
  Similar to blockchain technology, RTP transactions can’t be reversed once settled. This feature speeds up accounts receivable processing with payee confirmation that the obligation is fully settled.
• Account-to-account transfers
  Funds are not held in a digital wallet (i.e., PayPal, Venmo) from which they must be moved to a bank account. Instead, payees receive the funds directly to their bank account.

Settlement on rails other than RTP can take days, creating cash flow challenges at some businesses. For small businesses, real-time payments can help ease cash flow gaps with shorter settlement times.

“With RTP, the payer is in complete control of the timing and value of the payment, which is quite beneficial when compared to other ‘push pay’ solutions that leave payers wondering exactly when their account will be debited.” says McGortey. “No one likes surprises when it comes to their personal or business account balances.”

The combination of real-time initiation, settlement, and comprehensive data enables businesses to integrate financial transactions with current processes and systems to potentially eliminate after-the-fact reconciliations. For example, with RTP, when a biller (payee) requests funds from a payer (consumer or business), a detailed copy of the invoice or statement can be included directly with the payment request. The biller has full transparency into the payment request status and the payer has full view of the reason for the payment request. When the payer pushes the funds in real time to the biller, the data flowing with the transaction allows the biller to reconcile the bank account to accounts receivable in real time.

FedNow broadens real-time payments accessibility.

With a target launch date in 2023, FedNow is an alternative to the RTP Network that will incorporate clearing and payment settlement services for financial institutions of all sizes. FedNow will benefit banks that want options for processing RTP and, similarly, will offer two central clearing options. The option the bank chooses will likely be seamless for its customers. Like the RTP Network, FedNow will process and settle payments within seconds.

Evolving technology and consumer demand is paving the way to new payment methods. Contact Synovus Treasury and Payment Solutions, your Treasury Consultant, or Relationship Manager to see how our payment tools can help you deliver the shopping experience your customers expect.