Clearing House CPO says RTP growth in early stages

The Clearing House is a payments utility processing $2 trillion per day through wire, ACH, check image, and real-time payments. In 2017, The Clearing House launched the Real-Time Payments (RTP) network, which is available to all federally insured US depository institutions. 

Source: The Clearing House

On April 4, The Clearing House announced several records related to its RTP network. It handled 76M transactions in Q1 2024, valued at $42B; March was as a record month logging 27M transactions.

In an interview with The Financial Revolutionist, Margaret Weichert, Chief Product Officer of The Clearing House, suggests that RTP volume growth will only accelerate, centered around five B2B and B2C use cases that may help RTP outperform FedNow over the long run. 

This interview has been edited for length and clarity.

The Financial Revolutionist: I’m curious how much the record-breaking volumes RTP has seen are the result of The Clearing House’s efforts versus a macroeconomic indicator of payments volumes increasing across the board. 

Margaret Weichert: We're definitely increasing at levels that are significantly higher than GDP growth. We are seeing the volumes grow as more participants get on the network. I've spent almost 30 years working with payments, and there's a pattern where you get a nice 10% to 12% growth, and then as you get more participants, you start looking at [growth] in the 20s. We still think we're a ways from the true tipping point where we see runaway growth, but we're seeing what we would expect, given where we are in the life cycle. 

We're seeing volume coming on from account-to-account money movement—particularly in a high-rate environment, people are a little more sensitive to where their money is, and they're moving it between their own accounts. Ironically, in the wake of some uncertainty in the market, I think it increases the desire of people in the market to really stay in control of where their accounts are, and so that's a big driver of volume. 

Small businesses are also looking to get cash faster, so we're seeing an uptick in merchant funding that way. And we're seeing a number of new use cases around business-to-consumer payments. We’ve also seen a lot of P2P payments—Zelle transactions settled through the RTP network. 

How much is The Clearing House reacting to these leading use cases and changing any components of RTP as a result? 

We did a strategic review last year that caused us to prioritize five key use cases. Account-to-account is far and away the number one; business-to-consumer is a top one; P2P, with Zelle over RTP, is a big priority; we’re also looking at some longer-term use cases around bank-as-biller and earned wage access (EWA) to fund the gig economy. So we're making investments in those and they each have a different lifecycle. Account-to-account is probably the most mature, and yet we are still looking to tap a huge amount of value that is untapped in that space as well.

Part of what I'm really excited about is looking at each of our key use cases and identifying not only feature functionality improvement, and not only adding new endpoints to our network that will drive overall volume, but also making communications investments to make it easier to sell a solution. And we're working with a lot of third-party payment service providers and a lot of the fintechs who are in the payment service provider realm that really deeply understand what their customers need. They're great at creating bespoke user interfaces and things of that nature. So we're also doing a number of things on the distribution front to make sure we're close to the needs of those third-party service providers and can make sure our network is really giving them what they need to support their end customers.

How much are you looking at FedNow and trying to build RTP in a way that fills a niche where FedNow might not fit? 

That’s a great question; when I was running a fintech myself, one of the things I learned early on is that, if you have no competitors, you don't really have a market. So, the entrance of the Fed actually validates the market and creates momentum in the market. That said, we are much further along in terms of adoption and usage of our network, so we're not going to be complacent in that regard. 

But when a very large credit union went live, they ended up getting millions of dollars their very first day via RTP, because our reach represents 66% of DDAs and 90% of effective reach when you really look at the DDAs that are doing most of the transactions. 

“If you have no competitors, you don’t really have a market. So, the entrance of the Fed actually validates the market and creates momentum in the market.”

That said, we don't want to lose out on the receive side. We're spending time working with aggregators and the platform providers to the smaller banks to make it, from an experience standpoint, as easy to turn on RTP and economically attractive to turn on RTP at the same time that they're turning on FedNow if that's what they choose to do. We're partnering with a lot of players in the market to get that word out. RTP has a track record of supporting not just large banks—the ACH market I think is a great example, where we have 52% market share outside of government payments—and that encompasses receiving banks of every stripe of every size. We want the market to understand it's the same with RTP: CHIPS is a platform that really doesn't make sense for a small bank, but RTP is a network that does. 

You mentioned CHIPS versus RTP as one sort of nuance in your product offerings. What other misunderstandings do you feel like you need to correct when you go out there and talk to different financial institutions?

That’s a good question. I do think there's a general sense that because all banks, even the smallest, have relationships with the Fed, then they might not know The Clearing House necessarily. Even if they're receiving payments from EPN, they might not really know who EPN is. So one of the things we're doing is working with regional payment associations, many of whom work very, very closely with the small banks in a given geography, to craft play books that allow them to tell the story to the smaller institutions in a way that works for them. Over 90% of our participants in RTP are smaller community banks and credit unions under $10B in assets. 

Thinking internationally: Is part of the aspiration with RTP to develop a sort of SWIFT on steroids? I’m thinking about the cross-border precedent set by UPI in India.

There’s definitely a lot of strategic look at that. When we were at Sibos last year, we shared publicly a fair amount about a pilot we did called IXB, which was international real-time payments between the Eurozone and the US dollar zone. We continue to explore and evaluate the business around that. The global currency of e-commerce internationally is the US Dollar, and so the use cases that some of the economies like India or Brazil or others benefit differ from the US on the cross-border front—they’re bridging a gap to less fungibility, less fluidity. And there are many ways to move money between US accounts and elsewhere, and we’re working through the best way that is aligned with the needs of our market. 

Are regulatory concerns part of that equation? 

Yes, but what’s interesting is that the other thing that is different here is so many of our American consumers have a 16-digit number that allows them to do global commerce in a pretty flexible way. If I want to get an Airbnb in Canada or India, my 16-digit number in a wallet—from PayPal or Airbnb itself—would be sufficient to make that work in a way that might not be as available to, let’s say, an Indian consumer. 

How much are you working with fintechs while building out and scaling RTP? 

“There are many ways to move money between US accounts and elsewhere, and we’re working through the best way that is aligned with the needs of our market. ”

All of the true participants in our networks are banks, but there are a lot of fintech clients of my clients at the banks who are responsible for a huge amount of the volume on our network. A lot of the account-to-account volume is coming in through fintechs, and there are fintechs who are involved in the EWA space as well. There’ll be other use cases where you've got fintechs playing a role; there are many gig economy-type use cases where the fintech is really the player. 

The fintechs understand the value proposition. In an interest-rate environment like the one we're in, any fintech that made it feel like you were getting real-time funds movement when interest rates were close to zero now has a financial reason to think about accelerating the timing of money movement if they're essentially giving you credit on money they don't have yet.