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Fintech in Brief: The Clearing House Announces Adoption of Business Principles for Operation of the RTP® Network

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On March 28, 2019, the Supervisory Board of The Clearing House Payments Company L.L.C. (“TCH”) released its “Business Principles for the RTP® Network” (the “Principles”) outlining the operation of TCH’s RTP® Network (the “Network”). The Network, TCH’s real-time clearing and interbank settlement provider, currently is the only real-time payments system in the United States. The newly released Principles come as the Federal Reserve and non-TCH stakeholders have recently considered more regulatory involvement in the real-time payments space, including the possibility of the Federal Reserve establishing its own competing real-time payments system as part of its “Strategies for Improving the U.S. Payment Systeminitiative. Although community banks and some other payments operators support an increased role for the Federal Reserve in real-time faster payments, TCH as well as other industry leaders have openly questioned the need for more Federal Reserve involvement.

As part of the Federal Reserve’s initiative, last October it sought comment on two potential actions that could support further development of real-time settlement for faster payments in the U.S. while also promoting the resiliency and security of services offered to the public: (1) the development of a real-time interbank settlement service providing for faster payments 24 hours a day, seven days a week, 365 days a year (“24x7x365”); and (2) the development of a liquidity management tool that would operate on a 24x7x365 basis in support of services for real-time interbank settlement of faster payments, whether those services are provided by the private sector or the Federal Reserve Banks.

In an effort both to address the Federal Reserve’s regulatory concerns and to respond to requests for information by community banks, credit unions, and corporations, TCH’s Principles aim to increase transparency, ensure nondiscriminatory access for depository institutions, and protect the interests of all stakeholders—including non-TCH owner stakeholders. Interestingly, the Principles will apply so long as the Network is the country’s only real-time payments provider. The Principles include the following:

  • Nondiscriminatory eligibility requirements for all federally insured depository institutions
  • Flat-fee structures regardless of each participant’s size, and with no volume discounts or volume minimums
  • Publicly available rules and resources
  • Commitment to a safe, sound, and stable financial system
  • Protection of all stakeholders’ legitimate interests in decision making
  • Ongoing stakeholder input through advisory fora
  • Disclosure of major decisions to all stakeholders and, when it impacts the broader markets, disclosure to the general public

Concurrent with the release of these principles, TCH also announced that the RTP Business Committee, which oversees the Network, will now include four additional seats for community banks and credit unions.

TCH’s voluntary adoption of the Principles and its inclusion of community banks and credit union members in Network oversight attempts to assuage concerns over its status as the only operator of a real-time payments system in the country. TCH’s Principles will be part of a larger debate over the future of the payments system. Control over and access to the payments system are critical to consumers, community banks, and new entrants, and are likely to be scrutinized by policy makers and regulators as they assess the potential competitive and financial stability impacts of the Network.

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