The mega-banks' P2P venture, clearXchange LLC, has developed technology that could give it a key role in any implementation of faster payments in the U.S.
ClearXchange has long been in the background of the Federal Reserve's efforts to build a faster payments network in the U.S., working on its own multi-bank P2P system. Though clearXchange's membership comprises just a handful of banks, those banks serve over half of the U.S. online and mobile banking population.
The digital money transfer company, founded by JPMorgan Chase, Wells Fargo and Bank of America in 2011, now has a real-time payment option that works across its entire system. Until today, real-time payments through clearXchange occurred only when the sender and recipient were customers of the same bank.
Many of the essential ingredients for a real-time payments system in the U.S. exist in the new clearXchange model, said Mike Kennedy, CEO of clearXchange. The only omission is a cross-border payment capability; all of clearXchange's participants are based in the U.S.
"We have real-time funds availability, real-time messaging and use cases for tokenization for security," Kennedy said. "This meets all of the key criteria, so let's solve what we want to do in the U.S., and if there is a strong need to add international transactions to it, we can build upon our solution for that as well."
Unlike the initial P2P offering, which took a year or more to roll out for certain members, clearXchange participants will be able to implement real-time payments much faster. ClearXchange has also been steadily expanding its capabilities beyond P2P, with a focus on business-to-consumer and government payments.
"All of the banks are very excited about this," Kennedy said. "The banks see the benefit in having real-time payments and they believe in clearXchange doing it."
Among other use cases, real-time payments through clearXchange will help renters make payments to landlords on time, and also allow insurance companies to eliminate claims checks by providing funds to customers immediately, Kennedy added.
"If you were in a car accident and you needed money right away to go rent a car, the insurance provider can get that into your account in real time," Kennedy said.
ClearXchange has been working with the Federal Reserve during its discussions about a faster payments network in the U.S., and will suggest that it has the needed answer.
"Do I think that 100% of the participants in those discussions will think this is the solution? Probably not," Kennedy said. "But many will say this is in the market now, so let's go with it. A lot of banks will want to continue to join and expand upon our offerings."
Though clearXchange's focus has been on the country's largest banks, it is welcoming of banks of all sizes. Denver-based FirstBank joined in 2013 to be able to offer the same P2P capabilities that were advertised by the mega-banks that serve the same market.
ClearXchange's real-time technology could work side-by-side with Nacha's latest efforts in establishing same-day payments, depending on the use case, Kennedy said.
"They have different windows within their solutions when transactions have to be submitted by to even be done in the same day, whereas we are looking at a 24/7 solution," Kennedy added.
In addition to its member banks offering the real-time service through online and mobile banking portals, the clearXchange is open to any consumer with a bank account through the clearXchange.com site.
Like other payment technology developments, such as mobile wallets, it is possible the U.S. will end up with a set of different real-time options for financial institutions and consumers to contemplate.
"There are a lot of different initiatives underway here domestically and there is a need for a variety of options in different systems, or that can cross systems," said Beth Robertson, managing director at Robertson Payments Services LLC.
Expanding the methodology of bigger payments into the mobile channel to serve e-commerce and the point of sale creates new needs for real-time technology that didn't previously exist, Robertson said.
The industry will no longer question whether real-time payments are a possibility, based on what clearXchange has developed. As much as anything, the real-time payments debate now comes down to which option the industry wants to implement, she added.
"Banks will benefit from real-time payments, but is clearXchange the support network to do it?" Robertson said. "There are arguments people will make for different networks or providers."
If debit, credit or ACH can better fit a needed transaction and meet the criteria of a risk profile, those systems will attract their own supporters for real-time payments, Robertson added.