Tight Business Cases Accelerate Credit Unions’ Shift to Real-Time Payments

Executives at financial institutions large and small know that faster payments are becoming a part of their strategic and competitive roadmaps. If they don’t offer instant fund flows, retail and commercial clients will vote with their feet and move their accounts to a competitor.

But for banks, and particularly smaller financial institutions (FIs), the move into real-time capabilities has been a process, and a cautious one. Most small to mid-sized FIs surveyed by PYMNTS Intelligence in a recent report done in collaboration with The Clearing House have said they will begin with receive-only capabilities. Only 22% of smaller FIs said they would go live with send and receive capabilities at launch.

Part of the issue lies with a fragmented technical landscape, as Veridian Credit Union Real Time Payment Administrator Colin Eagan told PYMNTS in a recent interview. There are different payment systems for a slew of different payment types; connecting to a variety of different payment rails can be a challenge in terms of integration. 

“Our members have been asking for ways to transfer money, faster,” said Eagan, “outside of traditional ACH” and other methods offered across Veridian’s digital banking platform. The credit union’s commercial and retail clients, he said, especially wanted “send capabilities,” so the bank linked up with a service provider to tap into TCH’s RTP network to turn on that functionality.

As he told PYMNTS, having already enabled receive functions and then moving to send, Veridian found, “The instant payment rails have the chance to positively impact and improve multiple areas throughout your FI payment structure.” 

The journey toward instant payments, for Veridian, has been a carefully planned one. Eagan said, “What got us involved in the ‘jump’ [to instant payments] was that we had a couple of larger originating FinTechs that approached us wanting to make this available to their end customers.”

Veridian had joined the RTP® network to begin receiving instant payments in 2021. FinTechs, he said, served as the primary use cases for driving the monetization piece of the instant payments equation for Veridian’s shift toward adding send payments. Bringing on the service provider, he said, also set the stage for a widening variety of clients and payment use cases moving forward, creating an all-in-one payment rail for sending and receiving funds in the quickest and most cost-effective ways possible. 

While other FIs may seek to cement that connectivity to the real-time rails on their own, Veridian’s outsourcing of that integration was reflective of a focus on not over-extending the resources already on hand, through its core and web development teams. 

“We didn’t have a lot of hard deadlines attached to standing these [instant payment] functions up,” Eagan said, “so we really got the opportunity to get into the RTP system, learn it and do a very controlled slow rollout for what we wanted to see. This allowed us to properly allocate staff and resources and we became comfortable in that receive environment and that learning curve … allowed us to be that much more prepared when we did make the jump to send.”

The response, Eagan recounted, has been one marked by positive feedback from the CU’s members and from FinTech originators that are now in a live, send environment. The near-term roadmap includes a project wherein Veridian will examine the possibility of converting different payments and disbursements to instant payments, including shifting cashiers’ checks to digital and instant status.

“We’re also looking at the potential to shift some of our lending payments to the instant payment rails, which is going to satisfy our members, both retail and commercial, and potentially grow our lending portfolio,” he said.

As he told PYMNTS, “I do not see these instant payment rails as a full replacement of the existing payment systems that we have today — but I do see them as a way to take the next steps as an organization and enhance the services that we’re able to provide.”

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