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Immediate payments? Not so fast for big corporates

The Same Day payments service is struggling to gain traction with big corporates in the US. Could it learn from its UK cousin, Faster Payments, which saw record payment volumes last year?

The Association for Financial Professionals (AFP) reports that Same Day ACH in the US “has not been a smash hit with treasurers of large corporations”. Some of the reasons why the take-up by larger companies has not been as high as expected include:

  • some banks have not been overly active in promoting the Same Day service, according to reports by some corporates;
  • companies with operations on both the East coast and West coast of the US don't see a benefit for instant payments, as the start of the business day on the West coast might miss out on the payments processing window for companies on the East;
  • some treasurers are concerned a real-time payment could be irrevocable and could be sent by mistake; and
  • the $25,000 maximum threshold is also putting some corporates off – but this will be increased to $100,000 within the next year.

Faster Payments' UK success

Meanwhile in the UK, there seems to be a different story. The Faster Payments Service, which was launched in 2008, saw a record volume of payments last year and it continues to process an increasing number of payments. In 2016, the system processed its highest number of payments since it was set up, surpassing the 2015 figure of 1.2 billion by 14 per cent. In April 2017, Faster Payments processed 123.7 million payments totalling £105 billion for the month. Although individual banks set their own limits for payments done through Faster Payments, the overall limit set by the service is £250,000. But, while some banks (including Barclays, Citi, HSBC and Metro Bank) allow corporate customers to transfer the upper limit of £250,000 as one-off online payments, many banks in the UK have much lower thresholds (Santander UK: £100,000; Lloyds and Bank of Scotland: £99,999; Cooperative Bank: £20,000).

For corporates, some of the benefits of immediate payments include:

  • greater visibility of funds in their account, so planning is improved;
  • this also enables business to have more control over cash balances and improve liquidity;
  • improved visibility and control over cash flow and day's sales outstanding (DSO);
  • greater flexibility to make urgent payments when necessary; and
  • real-time authorisation and clearing.

CTMfile take: The UK seems to have made a success of immediate payments (judging by payment volumes) and the higher threshold of up to £250,000 could be a key factor for larger corporates. While The Clearing House plans to increase the Same Day threshold to $100,000, it may need to go much higher to attract the big corporate users.

This item appears in the following sections:
Payments - Disbursements
Urgent/Instant .Payments

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