Since June of this year, the largest US retailer has offered users of its Walmart Pay wallet app the opportunity to make payments for online purchases directly from their checking accounts. Those pay by bank purchases are delivered to the automated clearinghouse network (ACH) by Fiserv. Some are settled the same day and others within three days.
A proof of concept for instant payments settled in real time through links to the Federal Reserve’s FedNow Service and RTP from The Clearing House network has just been completed. Fiserv handled those Walmart Pay wallet transactions through its Now gateway. The test successfully showed that the funds could be settled instantly.
Instant payments are deducted from the consumer’s deposit account immediately and are simultaneously credited to the merchant’s account. The benefits to merchants also include no chargebacks and lower fees versus card payments.
For consumers, making pay by bank purchases settled through the ACH is similar to making a signature-based debit card payment. An instant payment settled through FedNow and RTP is similar to a PIN-based debit card transaction. If consumers were to view their account balance immediately after a PIN-based debit card or instant payment transaction, funds just spent would have already been deducted from their account balance. By comparison, pay by bank purchases settled through the ACH and signature-based debit card transactions would show a lag before funds are deducted. That lag could be later that same day or up to three days later.
Fiserv tokenizes all Walmart Pay wallet pay by bank transactions. Those tokens are issued on a per-account, not per-transaction basis.
Instant payments for consumer-to-business (C2B) retail payments are not yet available in the US because FedNow and RTP have not yet established rules and regulations to govern how financial institutions and merchants would treat returned merchandise, payment fraud (including friendly fraud), disputes and other operational considerations. Because Fiserv is Walmart’s check acceptance processor, those companies already operate under practices that reflect consumer protection issues that are still to be determined by FedNow and RTP.
Instant C2B payments are expected to be covered by the same Federal Reserve Board Regulation E that covers electronic funds transfers, debit cards and remittances.
Another gap that needs to be closed before instant C2B payments can come to market in the US involves financial institution acceptance. While 1,000 financial institutions are currently connected to FedNow, it will be several years before ubiquity has been achieved, enabling both the sending and receiving of instant payments.