Banks are pushing for greater adoption of real-time payments by focusing on specific activities that are in and of themselves time consuming, such as selling a car.
“We think RTP can be a competitive edge for auto sales,” said Mike Jorgensen, head of emerging solutions and strategy for U.S. Bancorp’s global treasury management business.
U.S. Bank in late March partnered with the auto sales e-commerce site Driveway.com to support near-instant settlement for car transactions. “Once Driveway comes into real-time payments, the other [auto sales] e-marketplaces may want to come in as well,” Jorgensen said.
Automotive transactions are emerging as an early use case for the Clearing House’s RTP rail. TD Bank has introduced a similar product and JPMorgan Chase has also mentioned auto-related purchases as a pain point in need of addressing.
The banks also hope real-time payments for auto sales can be a gateway for using the RTP rail for other large purchases.
“Without real-time pay, people can wait for days to get 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 trade-ins. To use the RTP feature, a consumer wishing to sell enters details about their car, then receives a quote. An email invitation follows, prompting the seller to provide payment and bank details via Driveway and a U.S. Bank co-branded digital payment portal. Following an agreed sale on the e-commerce site, a Driveway rep then inspects the seller’s car in-person. Afterward the payment is instantly deposited into the seller’s bank account through the RTP network.
The U.S. Bank/Driveway.com partnership is in pilot in the Portland, Oregon, area in anticipation of a wider rollout this year.
“Being able to send or receive real-time payments from customers shortens the time associated with both acquiring cars from customers and the sale,” said George Hines, senior vice president and chief technology officer for Lithia Motors & Driveway.com in Medford, Oregon. Lithia operates a network of about 280 auto dealerships, and Driveway is its e-commerce brand.
Driveway began working with U.S. Bank on the real-time pay portal about a year ago, hoping to shorten the 24-to-48-hour clearing window 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 from them,” Hines said. “This eliminates contacts from customers who are following up to see if a deposit has cleared the bank.”
Other banks are also looking to auto finance to boost real-time payments. Chase plans to replace wire transfers and cashier’s checks for auto payments with a real-time digital payment.
And TD Auto Finance recently launched real-time payments for its network of dealers. TD is using the RTP rail for auto sales contracts that are booked throughout the day, rather than handling them as batch payments overnight through ACH.
TD Bank hopes real-time payments will give dealers a greater visibility in their cash position by more closely matching deposits, fees and other auto-related payments to inventory. In that way, the desired benefit also matches other potential use cases for real-time pay, such as managing procurement, sales and inventory shortages and overages in an uncertain supply chain environment.
“Real-time payments is the next evolution within the auto space to help safely and securely increase cash flow for dealers,” said Jonathan Prendergast, head of U.S. payments strategy for TD’s Enterprise Payments Group in Wilmington, Delaware, in an email. TD Auto Finance began piloting real-time payments with a small group of dealers in 2021, and a nationwide rollout is underway for dealers whose banks are live on the RTP network. The participating banks on the RTP rail cover about two-thirds of U.S. bank deposits, and that percentage is expected to increase quickly as thousands of banks and financial institutions that use Jack Henry and Fiserv’s core processing systems come on board for both RTP and Request for Pay this year.
Reducing the funding time from overnight to hourly could present additional opportunities such as dealer incentives, according to Prendergast. “In addition, the system delivers significantly more opportunity to leverage data, an approach which will inform future applications of RTP across the bank,” Prendergast said.
Like TD Bank, U.S. Bank also hopes to provide real-time payments for larger purchases. The RTP payment limit quadrupled in 2020 to $100,000 in 2020 and is scheduled to reach $1 million on April 18, according to The Clearing House.
“The automotive industry is one of the big categories for us,” Jorgensen said, adding U.S. Bank is also interested in extending real-time payments for brokerages, real estate and back office corporate transactions. “We’re at a limited scope now. We’re looking to go larger as the limit goes up.”
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