733Park Podcast Plug-In: The Evolution of Real-Time Payments
In this week's 733Park Podcast Plug-In, we look into the Payments Nerds podcast episode "Evolution of Real-Time Payments Across Financial Services." The Payments Nerds podcast features expert guests who explore the most critical issues, topics, and trends in payments today. The guests in this episode are Carlos Rotger, Software Engineer for Payments and Bank Integrations at Digit, and Steven Bernstein, Executive Director at JP Morgan Chase.
Everyday payment platforms driving adoption
Payment services like Apple Pay, PayPal, and Square have become a part of daily life and have grown rapidly, becoming essential during social distancing. However, none of them are quite like Digit.
Digit: a new model in digital payment innovation
Digit is a digital savings app that analyzes your spending habits and helps you automatically save money. Money you save is held by Digit and can be moved to your bank account whenever you want.
Payment delays and challenges in digital transfers
Carlos from Digit mentioned that consumers' use of physical checks is decreasing about 7% every year, while the use of ACH payments is increasing about 7% every year. A major issue previously associated with electronic payments was their reliability. Banks are far more likely to trust a written check deposit than an ACH deposit, which can force a consumer to wait up to five business days to access their money. Check deposits often make funds available the same day because of established protections.
How real-time payments solve transfer delays
Consumers are unhappy with the usual 3 to 5 day electronic transfer delays, which are especially uncomfortable during emergencies. To address this, Carlos helped implement Digit's real-time payments (RTP) option, giving customers immediate access to payments after paying a fee. RTP works by combining immediate funds availability, settlement finality, instant confirmation, and integrated information flows, with payment providers temporarily covering transfers so banks give immediate access to deposited funds. RTP also allowed Digit to protect users against overdraft fees by monitoring account balances. Carlos says hundreds of thousands of Digit users a month use its RTP feature, and Digit generally prevents two overdraft fees for any user in their first year of overdraft prevention.
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