The first new U.S. payment system in 40 years is coming, and it aims to dramatically simplify processes from transaction initiation through to reconciliation.

Pivotal to this is the way Real-time Payments (RTP) combines immediate funds availability, settlement finality, instant confirmation, and integrated information flows—all in a payment made in seconds. Bringing together speed, data, and communication solves for longstanding challenges.

THE LIMITED SCOPE OF PAYMENT EFFICIENCY

SCENARIO 1: Your company receives a partial payment or insufficient detail to reconcile a payment.

SCENARIO 2: You are low on inventory, and you pay a supplier right away to release goods. Did your vendor receive the funds?

SCENARIO 3: A customer anxiously awaits an insurance claim payment following a catastrophe, and calls the adjustor impatiently. The adjustor doesn’t know what happened to the check so voids and reissues it.

Scenarios like these trigger a phone call, an exception process, research and delay.

The execution of a payment within the banking system is very efficient but that efficiency does not extend to the end-to-end processes around it. Complete and integrated information has always been a challenge. Communication is only in one direction from payer to payee. In order to pass information back and forth between counterparties communication must take place largely outside of the payment system. Lag times in payment and settlement exacerbate the communication issues. A lack of transparency on the whereabouts and arrival of funds can hinder the flow of business especially when urgent. The sum total of challenges impacts liquidity and risk management along with cash positioning and forecasting.

Companies have developed workarounds to bridge fragmented processes. Solutions through services and outsourcing providers such as scanning and rekeying checks, purchase orders and invoices achieve standardization, automation and systems mapping to integrate payments and address pain.

SIMPLIFYING END-TO-END

RTP broadens the scope of efficiency to the business processes and communication surrounding a payment.

Business process simplification

Auto-posting occurs when the right level of data accompanies a transaction for invoice matching. Along with instant payment notification RTP provides flexibility so that all of the data needed to identify a payment and the reasons for exceptions can accompany a payment. Not only does this optimize auto-posting and reconciliation but also helps to minimize payments inquiries. Payees can dedicate fewer resources to receivables posting and reconciliation. This distinguishes RTP from other existing systems. Two-way communication

Existing payment systems allow communication from payer to its bank, and from its bank to the payee’s bank. A distinguishing attribute of RTP is the ability for bidirectional communication within the secure system. The value of this includes:

Payment confirmation Payers are notified by the RTP system that funds have reached the payee’s bank account. This is useful for urgent payment situations as it closes the information gap for payees awaiting funds and may help to minimize payment status inquiries to call centers.

Request for payment In the future vendors will be able to send a Request for Payment securely within the RTP system. A Pay It Now response will allow payers to choose immediate payment.

A RIPPLE EFFECT OF BENEFITS

Speed, transparency, integrated information and process simplification have a ripple effect of benefits. Examples include:

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FINANCIAL CONTROL CASH POSITIONING LIQUIDITY MANAGEMENT