Are advanced real-time payments making crypto less attractive?

The real-time payment systems that are popping up in major economies around the world are undermining the claim of crypto as a fast and inexpensive payment innovation. Instead, it’s slow, has limited capacity, and is unregulated, meaning users aren’t protected.

“Electronic payments have been on the rise for some time,” said Elena Whisler, senior vice president of The Clearing House, which launched real-time payments in November 2017.

“The global pandemic is forcing us to do things differently from a distance.”

Real-time payments can cost pennies or fractions of pennies, she said, and are often free for consumers — businesses tend to pay most payments for all payment types, she said. -she adds.

She sees crypto operating in closed-loop systems – you can’t easily switch from bitcoin to Ethereum and other digital assets.

“Our payment network can, and will, deliver what crypto claims to deliver. Right now, we see niche reasons why crypto exists – to hedge against currency or provide another way to buy goods and services.

However, to purchase goods and services with crypto, funds must move from crypto wallets to bank accounts.

“I still think the crypto audience is a bit of a niche – users looking to create investment mechanisms to buy and sell these cryptos. It’s not mature enough or massive enough for people to buy services with crypto. People are toying with the idea, but it’s not a mature concept yet. It is expensive and it is slow because it is not available to work in our daily life. I see it as an investment mechanism for trading.

Crypto advocates have touted it as a way to simplify cross-border payments and cut costs, but The Clearing House is also moving forward, Whisler said.

“We conducted a proof of concept for real-time cross-border payments. We have completed this, concentrated mainly between the United States and Europe with the clearing of the EBA (European Banking Authority). It showed the technical feasibility of moving from the US to a European financial institution and facilitating the payment flow, with minor formatting adjustments to ISO 20022, and having confirmation within seconds. The next step is to establish all participation-related workflows. »

The cross-border initiative, dubbed IXB (Immediate Cross Border), will likely launch in 2023. Eventually, it can lead to 24×7 movement of funds around the world for real-time, high-value payments.

“Any financial institution participating in the RTP network would be able to send or receive a payment in real time directly to any European financial institution member of the EBA clearing.”

The Clearing House is still prioritizing the next countries to get involved. Whisler said TCH would like to work with non-banks and fintechs that provide payment services as partners, rather than banks only providing settlement services. Financial institutions provide safety, security and trust, she added.

“They are regulated and operated to very high standards, which will indeed provide great security to these payment transactions and allow these payments to follow US payment laws to protect end consumers and businesses.”

For more on the subject, check out the transcript of an interview Karen Webster on Pymnts.com conducted in December with TCH Assistant General Counsel Rob Hunter. Hunter said the industry started thinking about real-time payments in 2010, but the global financial crisis meant banks ran out of money to invest in the technology.

(If you have an American Banker subscription, look up the big stories Kevin Wack told about how big banks blocked NACHA from moving to faster payments and his questioning whether the Fed had the will to budge – she faltered for several years and TCH got ahead of this one.)

Advances in real-time payments are rarely mentioned in crypto discussions – it’s almost as if the two topics are traveling on parallel but separate rails. In discussing a central bank digital currency (CBDC), Hunter brought the topics together: “We’ve seen a lot of debate in Congress on the issue,” Hunter said. “Most of it has focused on the potential benefits of central bank digital currency. I think the question needs to be asked: what problem does this actually solve? »

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