Last year, the Federal Reserve set a goal of having ubiquitous faster payments available in the United States by 2020, and now the first estimates are emerging of just how much dollar volume will flow across systems already in place and in progress. The total will come to $650 billion this year, according to “Faster Payments: U.S. Forecast, 2017-2021,” a report released Tuesday by Mercator Advisory Group, a Maynard, Mass.-based consulting firm.
That’s volume across peer-to-peer, business-to-business, business-to-consumer, and consumer-to-business payments channels where funds are available anywhere from within minutes to the next day. Right now the biggest such system is the automated clearing house network, which has mandated same-day settlement for both credits and debits if certain processing windows are met.
The Clearing House, a New York City-based processor owned by the nation’s biggest banks, is introducing a real-time system that settles within minutes and doesn’t rely on any existing bank connections. Also, Visa Inc. and Mastercard Inc. have made their Visa Direct and Mastercard Send systems available for processing on their networks, and many big banks are rolling out Zelle, a P2P service.
But while volume is already flowing, Mercator analysts point out that the absence of an overarching mandate for faster payments from the Fed or any other regulator has both advantages and disadvantages. On the one hand, the approach could encourage innovation among providers and choice for users. “There will be multiple options,” says report author Sarah Grotta, director of the debit and alternative products advisory service at Mercator.
On the other hand, it may hinder ubiquity compared to other countries, where regulators specified a single system with ubiquitous endpoints. “It may slow adoption,” Grotta says. “There’s going to be a pause as users assess what is going to be the platform for them and make bets as to which ones will have longevity.”
At least in the short term, multiple options could lead to some head-scratching among users. “We’re anticipating there’ll be a certain amount of confusion,” says Aaron McPherson, vice president of research operations at Mercator.
For this year, as Grotta points out, most of the faster-payments volume will come from a few sources. “A lot of that is what we’re seeing around Zelle, also same-day ACH,” she notes.