Real-Time Payments from FedNow Versus The Clearing House: Where Does Request for Payment Fit?

During the AFP conference in Nashville, a panel led by Dean Nolan of Strategic Resource Management explored the evolution of instant payments and the role of Request for Payment (RFP). Panelists included Netflix’s Joshua Karoly, The Clearing House’s Cheryl Gurz, and US Bank’s Mike Thomas. Key metrics highlighted the expansion of FedNow to over 1,000 financial institutions and the real-time payment (RTP) network’s achievement of its billionth transaction, according to Finextra.

Despite skepticism from the U.S. audience, the panel emphasized the benefits of RFP. As a non-financial instant payment message, RFP allows payees to request funds through their financial institutions, with notable benefits:

• Security: Payers control the timing of the payment.
• Precision: Payments are executed exactly as scheduled.
• Availability: Funds become immediately available to the recipient.
• Efficiency: Straight-through processing supports both payors and payees.

Mike Thomas elaborated, saying, “On the payee side, you’re in control of the data. On the payer side, you’re in control of the timing, so the control is in the right party’s hands.” Cheryl Gurz emphasized that RFP offers more than speed: “The RTP networks are credit push networks… not just about faster payments but about precision.”

The session also discussed the importance of a phased rollout to ensure smooth integration and reduce risks. Gurz mentioned that while migrating to RFP is technically manageable, the banking sector needs time to adapt to this new method of handling receivables and payments. Pay-by-bank solutions, seen as the next evolution, come with added security considerations.

Joshua Karoly highlighted the demand for recurring subscriptions and the limitations of current payment systems. “Many customers prefer paying directly from their bank accounts without using cards or PayPal,» he explained. «Instant bank rails offer a solution to this issue.” He also noted that RFP could improve transparency and enable customers to manage subscriptions more effectively, either through the merchant or their bank.

The discussion at AFP underscored the potential of RFP to enhance the user experience by giving consumers greater control over payments and enabling banks to support real-time transactions efficiently.