The real-time payments network built by The Clearing House Payments Co. LLC is often viewed as a creature of the big banks, including the ones that own and control TCH, but on Friday it became clear that some of the nation’s smallest financial institutions are ready to sign up for the faster-payments system.
TCH announced that Avidia Bank, a Hudson, Mass.-based institution, has agreed to connect to the RTP system. At $1.6 billion in assets, Avidia ranks around number 400 among the nation’s commercial banks, according to the Federal Reserve. And Avidia Bank is just the first institution of its size to be made public as an RTP client. Other smaller banks and credit unions are also “in the pipeline,” though not yet announced, Steve Ledford, senior vice president of product and strategy at New York City-based TCH, tells Digital Transactions News.
As for Avidia Bank, the decision to offer real-time payments stemmed from a strategic emphasis on payments as a banking service. “Providing real-time payments is an important step for us, allowing us to deliver important new functionality to our customers,” said Robert Conery, chief operating officer at Avidia Bank, in a statement. “As existing payment channels evolve and access to faster-payment alternatives become ubiquitous in the digital era, we shall leverage this opportunity by partnering with TCH to provide products to both local and national markets.”
“Every bank has priorities,” says Ledford. “At Avidia, they are very progressive in their view that payments is a core product and a way they can differentiate themselves.”
Some 24 major financial institutions own TCH, including big names like JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc., leading some observers to view the company as designed to serve big-bank interests. Indeed, when the Federal Reserve announced in October it was looking into the possibility of offering real-time gross settlement as an operator, the move was seen by some as an alternative for smaller institutions wary of TCH. The Fed has not announced any decision regarding the move, and indeed any word about its intentions appears unlikely to emerge any time soon.
For his part, Ledford says the fact RTP is attracting small banks is “absolutely a good sign.” RTP, he adds, “has to be a network for all financial institutions, not just members of The Clearing House.”
A response to a global movement toward real-time settlement, the RTP system went live late in 2017. It is based on programming designed by Mastercard Inc.’s Vocalink unit, which has built real-time payments systems in the United Kingdom and other parts of the world.
TCH says 15 financial institutions are live so far on the the RTP network, which can now access more than half of all U.S. demand-deposit accounts, with a goal of reaching all such accounts by next year.