13th June 2023

Real-Time Payments Takeoff: Inside Perspectives From Payments Expert, Rishi Munjal

By Pau Castillo

Money is probably one of the slowest-moving commodities, especially in the US. For comparison, it takes an average of 12 minutes to physically deliver a Domino’s pizza, but several days before the payment for that pizza shows up in the store’s account. This happens although every aspect of payment clearing and settlement is happening electronically.

Payments and fintech leader Rishi Munjal sees this as a foundational problem facing consumers, merchants, and corporates. “The slow settlement speeds are not just a problem for businesses. Think of the 60% of US adults, including 45% of high-earners, who live paycheck to paycheck and have bills to pay,” Munjal notes. He adds that there is nothing like a “Domino’s pizza tracker” that can give consumers visibility into their incoming or outgoing payments.

This lack of speed and visibility is partly responsible for US consumers paying $8.84 billion in overdraft and Non-Sufficient-Funds (NSF) fees in 2020. Munjal mentions, “NSF and overdrafts are the tax that consumers pay because we haven’t been able to evolve payment systems in alignment with customer needs.”

Munjal has been addressing this problem as a payments practitioner at a Big-4 consulting firm and later as an executive at a software-as-a-service provider. He led the initiative at The Clearing House, applying Design Thinking to reimagine the bank bill pay experience built on the US’s first real-time payment system – RTP® – launched in 2017.

“The launch of RTP® was the most significant update to US payment systems in over 40 years, enabling movement of money from payers to payees, 24X7 in a matter of seconds. This is a game changer relative to traditional payment systems like the ACH that take 1-3 business days to clear and settle and are not available over weekends and holidays,” Munjal emphasizes.

He notes that a payment system launch is like a plumber setting up the “pipes with no faucets.” It is up to the banks to build the faucets (i.e., financial products) like real-time bill pay that would transform the way consumers and businesses pay and get paid.

Addressing the challenges of real-time payments

Unlike countries such as India, where the central bank mandate forced banks to connect to and build products on the new real-time payment system, the Federal Reserve has chosen to let the industry guide the pace of product development and customer adoption. Munjal believes that most banks are encumbered by legacy technology, so any change takes years and millions of dollars of spending. Many banks did not see the business case for introducing real-time payments, while others saw it as a threat to their profitable card business.

“No matter what the bank’s reasons were to move slowly with the modernization, there was agreement among the banks regarding the benefits to end customers during the design thinking workshops I facilitated,” Munjal explains.

The banks that participated in the bill pay initiative had divergent needs, but Munjal helped them align on a set of common requirements that are being used by the banks in their respective journeys to modernize their payment platforms. Real-time payments still account for about 1% of transactions in the US, and there is still a long way to go before this capability gains critical mass.

The future of real-time payments

Munjal believes that the success of real-time payments is likely to be mixed in the short to medium term. However, in the long term, real-time payments will likely become part of the fabric of how customers pay for products and services. “There are reasons to be optimistic as FedNow launches this July, with over 100 organizations participating in the pilot,” Munjal says. He is cautious that the Federal Reserve and The Clearing House are not making the two systems interoperable, which means that the onus is on the banks to hide the behind-the-scenes complexity from the end customer.

Taking the industry forward

Munjal is currently part of a Federal Reserve working group (FedNow Request for Payments Workgroup), shaping the launch and adoption of faster payments in the US. He is playing a vital role in bridging the gaps between different stakeholders and customers, advancing the process of real-time payment systems in the US.

Implementing and scaling real-time payment systems pose significant challenges, but overcoming them with fintech experts like Munjal is crucial to unlocking the full potential of instantaneous and seamless financial transactions. As technology advances and consumer expectations evolve, the scalability and effectiveness of real-time payment systems will shape the future of finance, promoting efficiency, innovation, and enhanced customer satisfaction.