Implementation of faster and Real Time Payments and regulatory outlook

Implementation of faster and Real Time Payments and regulatory outlook

By James Colassano, Product Development and Strategy, The Clearing House 

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I’ve been in banking almost 30 years, the majority of that time spent in the payments and cash management business. I’ve worked in or have run almost every product and discipline in that business. I started my career at Chase where I was grounded in the fundamentals of payments and was also fortunate enough to have worked on numerous merger teams over 15 years and had a leadership role in an internet venture for business to business payments.

After my years at Chase, I joined HSBC, where I spent 5 years as head of their U.S. Payable, Receivable and Liquidity products, and 5 as the global head of HSBC’s Global Payables Product. In the latter, I had responsibility for HSBC’s global real time payments portfolio. I joined The Clearing House in 2017 to help launch RTP®, the first 24×7 real time payments platform in the U.S., and the first new payments infrastructure to be launched in the U.S. in the past 40 years.

I am currently the product executive for the RTP® network and manage the bank relationships which include onboarding, business strategy, applications and use case development across all business & consumer use cases. I also have responsibility for corporate relationships related to the RTP network and other product expansion activities across The Clearing House.

What, for you, are the benefits of attending a conference like the Payments USA and what can attendees expect to learn from your session?

The biggest benefit of attending a conference like this is the opportunity to learn from and to interact with peers and subject matter experts in the rapidly evolving area of payments. This space right now has a multitude of solution providers and a regulatory environment that can quickly get confusing and complex. A conference like Payments USA can help to clear away the smoke around these various elements and clarify how all the pieces of the ecosystem fit together. The sessions themselves will be very informative, but the opportunity to make new contacts is invaluable as this space continues to evolve and mature.

The Clearing House is in a unique position in the industry as having the only U.S. payments infrastructure that actually clears and settles transactions in real time, 24×7. My sessions will focus on how the system will scale and ultimately reach ubiquity across the U.S. payments landscape. The other significant aspect of the RTP network is the opportunity to use information that accompanies the payment to create transparency and eliminate the friction and inefficiency that exists in virtually all traditional payment platforms.  And by allowing payments to be made with precision, RTP can also provide a unique benefit to cash flow and accounts payable management.

Finally, attendees will learn about how speed and transparency can transform the end user experience and better align with the direction that commerce is moving.

You will be joined by Citi, HSBC and BNY Mellon, in your opinion, what are the benefits and key challenges of interacting in discussion of the faster RTP network scaling up solutions and the regulatory outlook?

I enjoy the interactive nature of panel discussions since they bring various perspectives to the topic being discussed, and this is a great group of banks to have engaged in this conversation.  The issues involved in scaling the RTP network differ depending on your perspective and audiences will always benefit by having diverse points of view. For The Clearing House, it’s mainly about bringing banks of all sizes on board and achieving the ubiquity and reach that keeps the network growing and valuable to its users.  Banks are focused on bringing volume to the network and making it available for all of its business and consumer clients. How they achieve that scale may and does vary depending on the focus of the institution and the approach they take toward product design.

The question of regulatory outlook in the U.S. is an especially interesting one, particularly now as the Federal Reserve contemplates an operating role in Faster Payments.  It puts the questions of interoperability and settlement risk between operators squarely at the center of the discussion, and can have very real implications to banks of all sizes as they look to develop products and capabilities to support the evolving nature of commerce in the U.S.

With the increased use of Payment Networks and P2P network, what are the key challenges when dealing with efficiencies for customers and enhancing the customer experience?

The RTP network uses a set of standard ISO 20022 RTP messages, to move both financial and non-financial information between parties in real time. That information, coupled with the transparency and finality of the payment and the other core capabilities of the system, provide real efficiencies and benefits to both banks and their clients. It has the potential to eliminate traditional exception or “day 2” processes that are time consuming and expensive.

The request for payment (RFP) is an example of one message that has incredible potential. The RFP can carry all of the information needed by a seller (of any size) to apply a payment in their Accounts Receivable system directly to the buyer’s bank account. When a payment is made against that RFP, it returns all of the information needed to apply that payment without any human intervention, resulting in 100% straight through processing and cash application in seconds. The key challenge comes from the fact that many applications and processes in that chain still operate in batch, and need to evolve toward a model that can start to ingest these messages.

The resulting benefits to client experience are many, but the most obvious one is how well the RTP message set and immediate/confirmed responses support the mobile experience. The ability to make precision payments in seconds and to conduct conversational commerce on mobile devices has the potential to truly transform the payment experience for both a bank’s and biller’s customers.

How do you see the impact of Payments evolving in the USA over the next 6-12 months?

I think the next year will bring a good deal of innovation in payments as the market starts to more broadly adopt real time and faster payments solutions. As the systems scale, I believe you’ll see banks of all sizes begin to incorporate these payment and messaging capabilities into their products and platforms, and start developing new products built on the ISO 20022 messaging standards. As efficiency increases through the use of these tools, I also believe that we will begin to see a new paradigm evolve that will be more user centric and collaborative around the elements of usability and design. API’s will play a prominent part in the evolution of payments across the ecosystem and help drive this innovation and speed to market for banks, and the technology companies that support them.

The regulatory environment will also continue to evolve in this space and I believe will add value to the RTP network and the various private sector efforts through a continuing focus on payments modernization and expanded support for critical settlement services. The payments business has historically been slow to change so perhaps I am being optimistic with respect to the time line, but it is clear that significant and transformative change is coming to payments.


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