With Technology from VocaLink And FIS, TCH Sees a Faster Way to Real-Time Payments

With two key announcements this week, The Clearing House Payments Co. LLC has brought the finish line much closer in its run to build a U.S. real-time payments system. While the New York City-based company has not set a date for completion, senior executives told Digital Transactions News Tuesday TCH expects to conduct bank-integration testing next year for the system.

Owned by some of the nation’s biggest banks, TCH first announced its real-time initiative a year ago. On Tuesday, it said it will leverage technology from Fidelity National Information Systems Inc. (FIS), which three years ago unveiled its PayNet real-time payments structure.

The day before, TCH said it will rely on real-time expertise at VocaLink, a U.K. company that was instrumental in building that country’s faster-payments system, which went live in 2008.

The two arrangements are “a way to get to market more quickly and more cost-effectively,” says Steve Ledford, who is spearheading TCH’s efforts as senior vice president for products and strategy. VocaLink, he says, offers “a core payment system platform for clearing and settlement and for transmitting messages. We’re going to adapt it for the U.S. market.”

One important adaptation, he says, will include an extensive messaging capability that will allow the system to capture data surrounding a transaction and send the information to sellers and other parties. Immediate alerts sent to senders of payments can help control fraud, he adds, in a system like TCH’s, which will depend on so-called credit push. In this scenario, senders initiate, or “push,” payments to receivers, for whom the payments appear in their accounts as credits.

Last year, The Clearing House listed a number of features it says the new system will offer, including: direct person-to-person payments from and to existing accounts using online or mobile banking; tokens masking actual bank-account credentials; and immediate good-funds verification by sending banks; and authentication of sending and receiving parties by their banks, in addition to messaging to parties to the transaction.

In real-time payment systems, receivers of payments get access to their funds immediately, rather than a day or two later, as is typical with automated clearing house transactions. Ledford will not disclose the extent of TCH’s investment in VocaLink’s system.

As for FIS’s technology, Ledford says this will smooth the way for financial institutions to build connections to TCH’s new system. “The core will be the VocaLink platform, and FIS is providing a way to get there,” he sums up. “We want to be sure this really is a national system.”

With the incorporation of the VocaLink and FIS technology, TCH now expects financial institutions will be able to start testing those connections in 2016, says Russ Waterhouse, executive vice president for product development and strategy at TCH. Still, the company isn’t ready to project a “go-live” date, Ledford says. Already, he says, TCH has “already been able to shorten our schedule since we announced a year ago.”

One factor has helped speed up development, say Ledford and Waterhouse. This is the introduction of mobile wallets, which depend on security tools like fingerprint recognition that can also work to secure instant payments. “A lot of money has gone into that,” says Waterhouse.

TCH’s work is part of a general movement toward faster—and, in some cases, real-time—payments that began to accelerate in the last few years in the United States. Besides TCH and FIS, the Federal Reserve began sponsoring a faster-payments initiative that now includes scores of executives representing a wide cross-section of the payments industry. Earlier this year, NACHA introduced new rules that will enable same-day ACH settlement starting in 2016, a process that will speed up transactions by at least a day.

TCH serves as an operator, or switch, for roughly half of the ACH volume in the U.S. and was also a major player in the country’s move toward image exchange, a technology that has largely converted paper checks to electronic processing.