Banks are pushing for greater adoption of real-time payments by focusing on specific activities that themselves take time, such as selling a car.
“We believe RTP can be a competitive advantage for auto sales,” said Mike Jorgensen, head of emerging solutions and strategy for US Bancorp’s global cash management business.
In late March, US Bank partnered with e-commerce auto-trading site Driveway.com to support near-instant settlement of auto transactions. “Once Driveway enters real-time payments, the other [auto sales] e-marketplaces may also want to enter,” Jorgen said.
Auto transactions are emerging as one of the first use cases for the clearinghouse rail RTP. TD Bank launched a similar product, and JPMorgan Chase also mentioned auto-related purchases as a problem to be solved.
Banks also hope that real-time payments for auto sales can be a gateway to using RTP rail for other major purchases.
“Without real-time payment, people can wait days to receive payments. It can now be in accounts in seconds,” Jorgensen said. “That’s before the car leaves the driveway.”
Driveway.com supports sales, purchases and exchanges. To use the RTP feature, a consumer wishing to sell enters their car details and then receives a quote. An email invitation follows, prompting the seller to provide payment and banking information through Driveway and a US Bank co-branded digital payment portal. Following an agreed sale on the e-commerce site, a Driveway representative then inspects the seller’s car in person. Then the payment is instantly deposited into the seller’s bank account via the RTP network.
The US Bank/Driveway.com partnership is in a pilot phase in the Portland, Oregon area, in anticipation of a broader rollout this year.
“Being able to send or receive real-time payments from customers reduces the time associated with both acquiring cars from customers and selling them,” said George Hines, vice president senior and chief technology officer at Lithia Motors & Driveway.com in Medford, Oregon. . Lithia operates a network of approximately 280 car dealerships, and Driveway is its e-commerce brand.
Driveway began working with US Bank on the real-time payment portal about a year ago, hoping to shorten the clearing window from 24 to 48 hours for digital transfers and delays of up to several days for checks.
“The customer can instantly see the deposit for the car Driveway is buying them,” Hines said. “This eliminates customer contacts who follow up to see if a deposit has cleared the bank.”
Other banks are also turning to automatic funding to increase real-time payments. hunt plans to replace wire transfers and cashier’s checks for automatic payments with real-time digital payment.
And TD Auto Finance recently launched real-time payments for its dealer network. TD uses rail RTP for auto sales contracts that are booked throughout the day, rather than treating them as bulk payments overnight via ACH.
TD Bank hopes real-time payments will give dealers greater visibility into their cash position by more closely matching deposits, fees and other auto-related payments to inventory. This way, the desired benefit also matches other potential use cases for real-time payroll, such as managing purchases, sales, and stock-outs and overages in a uncertain supply chain environment.
“Real-time payments are the next evolution in the automotive space to help securely increase dealership cash flow,” said Jonathan Prendergast, head of US payments strategy for Enterprise Payments Group. from TD in Wilmington, Delaware, in an email. TD Auto Finance began piloting real-time payments with a small group of dealerships in 2021, and a nationwide rollout is underway for dealerships whose banks are live on the RTP network. Banks participating in RTP rail coverage about two thirds of U.S. bank deposits, and that percentage is expected to grow rapidly as thousands of banks and financial institutions that use core processing systems from Jack Henry and Fiserv join both RTP and demand payment this year.
According to Prendergast, reducing funding time from night to hour could present additional opportunities such as dealer incentives. “Additionally, the system offers many more opportunities to leverage data, an approach that will inform future applications of RTP across the bank,” Prendergast said.
Like TD Bank, US Bank also hopes to provide real-time payments for larger purchases. The RTP payout limit quadrupled in 2020 to $100,000 in 2020 and is expected to hit $1 million on April 22, according to the Clearing House.
“The automotive industry is one of the big categories for us,” Jorgensen said, adding that US Bank is also interested in expanding real-time payments for brokerages, real estate and corporate transactions. back-office. “We are now in a limited scope. We are looking to expand as the limit increases.”