The Continued Evolution of Real-Time Payments with Rusiru Gunasena of The Clearing House
Join Jacob Hollabaugh in this riveting episode of PayPod, as he explores the transformative journey of real-time payments in the financial landscape with Rusiru Gunasena, a distinguished guest from The Clearing House. Delve into the evolution, challenges, and future trends shaping the payments ecosystem, focusing on the significant impact of the Real-Time Payments (RTP) system over the past six years.
Lessons You’ll Learn:
In this episode, listeners will gain insights into the transformative journey of the Real-Time Payments (RTP) system over the past six years. Discover the impact of RTP on the payments landscape, its technical intricacies, and the strategies employed to ensure continuous operation. Learn about the integration of RTP with existing banking systems and its scalability for future digital payment growth. Explore the influence of emerging technologies and understand the competitive dynamics in the payments ecosystem, including the impact of the Federal Reserve’s FedNow.
About Our Guest:
Rusiru Gunasena, representing The Clearing House, brings a wealth of expertise to the conversation. With a deep understanding of the payments industry, Rusiru provides valuable perspectives on the history and role of The Clearing House, offering listeners a comprehensive background to contextualize the discussion.
Explore the financial evolution with Rusiru Gunasena from The Clearing House. Learn about their pivotal role and the growth of the Real-Time Payments (RTP) system in six years. Understand the technical aspects, integration with existing banking systems, and scalability for digital payments. Uncover the influence of emerging technologies like blockchain and AI on RTP. Delve into the competitive landscape, including the impact of the Federal Reserve’s FedNow. Discover The Clearing House’s strategies for dominance and innovation, and get insights into future trends and exciting developments in the payments world over the next 12 months.
Our Guest: Building Tomorrow’s Payments with Rusiru Gunasena
In the fast-paced world of real-time payments, Rusiru Gunasena stands out as a key figure driving innovation. Currently serving as the Senior Vice President of Products and Strategy at The Clearing House, Rusiru brings over a decade of experience to the table. His role involves spearheading the RTP network’s product management and strategy, playing a crucial part in reshaping the payments landscape.
Rusiru’s journey includes a significant stint at Jack Henry & Associates, where he served as the Managing Director of Jack Henry PayCenter™. During his 13 years there, he oversaw the implementation of real-time payments, showcasing his prowess in managing complex payment architectures. As an influential figure in the US Payment Ecosystem, Rusiru actively participates in industry workgroups and committees, influencing digital payment innovation.
With a rich educational background, including an MBA in Entrepreneurship from the University of Louisville, Rusiru brings a unique blend of strategic vision and practical expertise. His diverse leadership experience, involvement in start-ups, and advocacy for innovation make him a driving force in the evolution of real-time payments. As the payments landscape continues to evolve, Rusiru Gunasena remains at the forefront, contributing significantly to the industry’s growth and technological advancements.
Rusiru Gunasena: Today we have moved on to collaborate with the fintechs. They are helping banks and credit unions. They are helping to further the technology, further the ecosystem and bring innovative solutions. They can move fast, they can build fast, and they can bring new and innovative ideas. So the Clearing House is very open. Their RTP network is very much open to fintechs, technology providers, payment service providers who are a critical part of the payment ecosystem. We are looking at whether it’s APIs, whether it’s open banking APIs and other technologies to make sure that we are staying forefront of those technologies as well.
Jacob Hollabaugh: Welcome to Paypod, the payments industry podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world, from payment processing to risk management, and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place. Hello, everyone. Welcome to Pay Pod. I’m your host, Jacob Hollabaugh, and today is a very exciting day for the show. We are going to be diving into all topics related to speed of payments, the continued acceleration of payments infrastructure, and we’re lucky enough to get to do so by speaking with one of the people who is truly at the helm of these advancements. I’m honoured to be joined by Rusiru Gunasena, Senior Vice President, Products and Strategy for the RTP real-time payments division of The Clearing House. Rusiru, welcome to the show. Thank you so much for joining me today
Rusiru Gunasena: Thank you. Jacob, it is a real pleasure to get to speak with you.
Jacob Hollabaugh: And before we dive into RTP the world of payment processing, for those listening I would assume anyone listening, whether they’re our audience, kind of falls in two groups. We have a lot of people within the payments world who certainly are very familiar with The Clearing House, but we also have a lot of small, medium-sized business owners who are listening in, who I would assume anyone recognizes the name, The Clearing House at the very least, but maybe doesn’t fully grasp the scale of operation or the importance of the operation that you all do. So could you give a little overview of who The Clearing House is, its history, and the scale you operate at, or the role you play within the payments landscape?
Rusiru Gunasena: Sure. Thank you for the opportunity and pleasure to be here. The Clearing House was formed in 1853, 170 years ago. It is amazing to be a part of that organization who operates market infrastructure payment networks in the United States. We operate three major networks. One is the EPN network, which is the SEH equivalent, and then the chips network, which is the Fedwire equivalent and latest, the real-time payments network. We also have a check image processing solution. So those are the four major solution in addition to the the other complementary solutions we have, we certainly have over the years expanded our services beyond that check processing and then into real-time payments. So real time payments really revolutionized the payment landscape in the United States by implementing that five years or now, the sixth year of operation, coming very soon, the anniversary.
Jacob Hollabaugh: Yeah, it’s astounding to hear. I mean, it’s one thing to read it, but then just like think about 170 years is just amazing. There’s a few people the financial industry is one that’s obviously been around forever. So there’s a handful of different companies and institutions that have those kind of mind-boggling numbers of we’ve been around since such and such year, but it’s pretty wild to think about and to be able to be relevant and leading the industry for that long is certainly quite the testament to the great work that’s being done. You mentioned as leading the industry one of the big inflection points of recently in the division you now head is the network real time payments. I think you used the word revolutionary. How revolutionary exactly was it when we introduced this back six years ago? And what’s that growth journey been like? Has it followed suit with maybe what the goals were over these first six years? Has it had any big changes that were unexpected? What’s the first six years of the journey look like?
Rusiru Gunasena: Definitely have been involved in payments from the get-go from the industry perspective, even outside of The Clearing House, I work for a processor who was the first processor to be live on our network. So I started with a blank piece of paper on real-time payments when it was just a conversation in the United States in the 2015-16 time frame. So in 2017, we implemented RTP The Clearing House was the first network to implement RTP as the real time payments network. It was truly a leap forward in the capabilities of the US payment ecosystem. The initiative was born out of the recognition that the existing payment infrastructure was lagging. If you really think about it, from the infrastructure to make real-time payments was really evolving outside of United States. United Kingdom was one of the first countries to implement. They were about five years in when we implemented real time payments here. Speed, I would say, is one of the key critical components. The primary goal was to enable payments that are almost instant, 24 over seven, 365.
And it’s with real-time settlement, real-time gross settlement, then the security. We always take security to the utmost importance in The Clearing house for any payment network we operate, to make sure they are secure and sound for our participants. And Hthen efficiency and innovation was the other key tenants, I would say, in the payments ecosystem and implementing RTP. But the most important thing I saw this first-hand from the industry itself, it was ubiquity. It was a network built for all financial institutions in the United States, both banks and credit unions. Today, if you look at the larger population of RTP institutions live we just passed the 400 mark, we have over 400 institutions today on the network out of that over 80% of institutions are community banks and credit unions who are alive on the network. So absolutely, it’s great information-rich transactions flowing through the RTP network. I would say has revolutionized the payment ecosystem in the United States.
Jacob Hollabaugh: And you mentioned we weren’t the first to do it that use the UK as the example. That was a handful of years in front of us. Is there any reason they got to it first, or is there anything we potentially learned from looking at the first few years of their rollout of it that we could either do better or different, or did it play much of a role at all? Being able to see someone else attempt it first at a smaller scale, market size-wise?
Rusiru Gunasena: Absolutely. We continue to learn from the real-time payment networks across the globe. We collaborate with them as well. We have certain information sharing, and certainly, we have taken the learnings from the previous implementations of real-time payments and continue to look at as they evolve and grow. What are the lessons learned? And also it’s worth mentioning, I think you touched on it. Our Ecosystem is very different from many other countries, many of the other jurisdictions. I think when the central bank says do this, all the banks line up and the population of institutions are sometimes a handful or 20 or 30. We have over 10,000 institutions, financial institutions here. And it’s not a dictatorship where the Federal Reserve comes and says, do this and everybody lines up and do it. It is very much a market-driven, democratic evolution of the payment ecosystem here. So it’s very different, right? So it takes time. It takes a lot of care and thought. We take our payment systems very seriously and the safety and security and the right design and the solution. So the owner banks of The Clearing House took a concerted effort to take that leadership in investment of that critical infrastructure and to build and deploy the RTP network very early on. So we were the first to implement that.
Jacob Hollabaugh: Yeah, absolutely. It’s quite the undertaking to do so at the scale that our country and our economic market offers. Is there any data you could share on just how big the volume is, what type of volume level of transactions you’re doing in a day or month or year, to give us an idea of the true wild scale of this, I, like you said, you’re at just at the 400 plus institutions that are a part of the network? I was actually looking on the website at, you have some really good graphs that show the six-year progression and some big spikes. Slowly but surely it snowballs into that. What type of volume are we talking at that you do now on RTP Network?
Rusiru Gunasena: The volume and the participants are continuing to grow month over month, quarter over quarter. We just surpassed the 1 million transactions a day limit as well. There were multiple days that RTP transactions were over 1 million a day, so we are trending around 25 to 30 million mark for a monthly volume and quarter over quarter. We are growing when it comes to transaction volume. The dollar value is also increasing. We have seen that the average transaction value of our transactions have gone now beyond 500. After the limit increase we had. Now the network limit is 1 million. So you can see the average dollar value of the transaction is also going up, which tells us that now the participants are using real-time payments for high dollar transactions, whether it’s real estate transactions or loan payments or loan payouts. When a loan is obtained, the funding of the loan, whether it’s a mortgage or auto loan. So you can see high-dollar transactions. So the average value is increasing. Some of the other growing use cases I would say as the network is growing, we see gig economy workers getting paid the same day so that they have money to pump gas the following day. So the earned wage access or instant wage access is a very dominant use case on the network.
Rusiru Gunasena: The digital wallet drawdowns very early on, I saw this even from the industry side, when an institution, even a community institution goes live without doing any marketing day one, they see funds flowing in real-time payments through our network into their institution accounts. So the consumers and businesses alike, they go to their digital wallets and do those drawdowns from those digital wallets into the institution accounts. So it helps the institutions with that deposit displacement issue. The money was sitting outside the institution in a digital wallet, which they did not have any control over or visibility to those funds sitting outside the institution. So those are top two use cases, I would say, among many others. Recently we implemented requests for payment that is also going to revolutionize bill pay, where the actual consumer then can get a request for payment from a biller that through a secured banking channel where they have control over paying that. It’s not like. Ach debit hitting your account and you don’t have any control over. So you get a request for payment. You are in control of authorizing and pushing and making that payment.
Jacob Hollabaugh: Yeah, that’s fascinating stuff and glad to see the growth. Certainly. And you referenced how many institutions are now on there. But combining that with the fact that we said how old The Clearing House is and how old some financial institutions are, it’s definitely an industry that has been as much as it’s needed, the technological advancements of the last 20 years or so. It’s sometimes the infrastructure can be a bit archaic, and RTP being the first of its kind means that most of the institutions, as they join the network, had existing systems that were not designed for real-time processing to be a part of it. So how does RTP effectively integrate with existing systems? Are or is it simply that new systems or new people who want to join the network have to make a big adaptation, or maybe a new build-out to required for a bank to successfully join and operate within the RTP network?
Rusiru Gunasena: I’ll start with within The Clearing House and the RTP network. It is critical market infrastructure. So we do take it very seriously when we build that infrastructure to make sure that they are designed and they meet the expectation of expectations of availability, speed, security and the demands of the velocity or the demands of the transaction. So certainly redundancy is built in the geographic distribution or the separation, the scalability and then real-time monitoring and the alerts are in place. So we use people, processes and technology, all three very effectively to build the network and also make sure they are secure and also compliant with all the regulatory requirements and the audit requirements as well. I would also say that we partner with other tech providers, security solution providers, fintechs to make sure they are building the right solution set. And I saw this again firsthand from the industry side when I collaborated with The Clearing House to build the real-time payments infrastructure, to connect to the network from where I was to connect thousands of financial institutions, both banks and credit unions, I implemented a payment hub. We built the right infrastructure. You are correct. It is a mindset shift for the industry participants, whether it’s third-party service providers or fintechs, to come into a 24×7 operating model, even to the financial institutions.
Rusiru Gunasena: It’s a change in how they operate and behave. Coming from a batch environment of ACH to a real-time payments environment, which is 20 473 65. So what I have encouraged from the industry as well as now from The Clearing House, is at least come on live as a receive-only institution. Make sure your technology and the people and the processes are ready for that. 24 over seven operating model and then start implementing the use cases. So definitely it is a mindset shift. And the technology platforms you touched on, I would say catching up if they are not, whether it’s the core platforms, there is a very democratic distribution of core platforms across thousands of financial institutions in the United States. Some go to sleep at night because of batch processing, but the mindset has shifted now to be 24×7, 365 because the customers are demanding real-time payments and they are operating 24×7. So the technology is catching up if they are not already, to operate in the real time payments landscape.
Jacob Hollabaugh: Yeah, it’s certainly at some point became an inevitability. Obviously, the at the consumer end, we would always someone we’re going to want our money faster if we can have it immediate. That is what everyone is going to want. And once we at some point over the last couple of decades, I’d imagine all financial institution realized that as that became a realistic thing to build and strive for, it was always going to be the demand of the market and of the consumer. So it was an inevitability that you got to get with the times and get on board with this or potentially be left behind if you’re not willing to reach out and find a way to engage with it. What is as more and more do as that number 400 continues increasing as those staggering volume numbers you shared earlier continue to increase and more and more of the marketplace says, we need this new use case to be done in real-time. We’re done with ACH or all the other options. What’s the scalability of the current RTP infrastructure? Is it built to continue to handle and continue to scale up as more of the financial world operates in real-time? Demand keeps going up and up. Is the current infrastructure built to handle that potential future growth, or is it going to take a while until that million-dollar limit increases again? So to speak.
Rusiru Gunasena: Definitely we have built the infrastructure to be highly scalable to accommodate the future growth in digital payments because we continue to forecast and see that there is going to be real-time payments growth, tremendous growth in the coming years. So the scalability is a core consideration of what we build in the modern payment ecosystem in the RTP network. So it’s definitely a scalable architecture. We also employ cloud infrastructure where it’s necessary to make sure that it supports the operations in a safe and secure manner, and then advanced data handling techniques as well. So we continue to monitor and look at the growth, and we operate at a very healthy level and try to maintain a very healthy level of load on the current system and continue to then build upon footprint to make sure that we are doing the forward planning, proactively doing that, and then also the financial institution or the third party processor engagement who are connecting to the network is also an ongoing effort to make sure they are ready. They are ready to support the load coming through them, whether it’s through their customers or whether it’s through their financial institutions they service. So it’s definitely investment in technology, innovation, people and processes to make sure that we continue to stay ahead and proactively monitor and build that scalability as well.
Jacob Hollabaugh: Certainly, now it’s an interesting time to get to speak with you because RTP network did get a new competitor this year, as the Federal Reserve has piloted and launched their own instant payments service that had been talked about for many a year. And as you referenced earlier, when a lot of other parts of the world, sometimes it is the government themselves that’s the one that’s rolling out these things. First, it wasn’t for us, but Fednow has now been rolled out throughout the year. How has that rollout impacted what you’re doing with RTP, if at all, and how do you see the introduction of a new rail system from the Federal Reserve itself, impacting kind of the payments landscape in general?
Rusiru Gunasena: We have definitely seen an increase in trust in real-time payments with the fed now launch. I saw that some of the financial institutions were waiting to see which way they should really implement real-time payments. When the FED announced the interest in deploying a real-time payment system, it created a little bit of confusion to start with. I saw that again firsthand from the industry side. Some of the institutions wanted to wait and see, and then now they can move on. So we have seen a renewed interest in real-time payments and especially the RTP network, because when the institutions are making the decision now to move on and integrate with the real-time payments, obviously they are making the decision to join a network who has over 500 institutions, who has volume over a million transaction flowing through the network and also the use cases supported. So the reach and the endpoints are there on that network. So we see a renewed interest in real time payments. It also has created a renewed education. And the use cases are now getting implemented by the other players in the ecosystem, whether they are payment service providers, whether they are fintechs servicing some sort of a payment movement use case they are now implementing on RTP first, not on the legacy rails. So that is also great to see new and innovative use cases getting implemented on RTP first. Also, some of the existing use cases are now moving over to the RTP network. So definitely a renewed interest and a healthy backlog of institutions wanting to join the RTP network.
Jacob Hollabaugh: You mentioned a bunch of the smaller, newer players, and we’ve referenced a few different times the explosion of fintechs in the last half-full decade here, beyond just fednow, there’s been this rapidly filling niche players as a service, startups, fintechs, potential disruptors who have come into the world of payments, the world of finance. And I’m interested to see what’s an interesting point of view that The Clearing House and you have that you are this the dominant player in the industry, been around literally forever, basically in our country’s financial institutions here. But you do still have to foster innovation, stay ahead of trends, and work with all of these new pop-up startups that are coming into. So can you speak to it all, what the kind of philosophy is from The Clearing House of trying to maintain your dominant position as an industry leader, while also still making sure we’ve been around 170 years? We’d like to be around another 170. We’d like to still foster innovation and not get stuck where we are at, and stay ahead of all of these new companies and new disruptors that are popping up. So what’s the philosophy of engagement with all of these new things that are popping up and trying to hold that position you’ve held in the industry while maintaining that that position stays that way for the foreseeable future?
Rusiru Gunasena: Absolutely. And we welcome the competition that keeps us all at the edge, continuing to innovate, continue to collaborate, and do realize that there is a healthy balance of competitiveness in the payments landscape. So I would say we continue to improve and upgrade internally our payment ecosystem and look at all innovative use cases, innovative technologies and see how we stay ahead of the competition. At the same time, collaborate with the technology providers, fintechs, innovators to make sure that we are providing our payments ecosystem capabilities to service their needs, whether it’s consumers or businesses who are served by these technology providers. And if you look at how the fintech started, they were looked at as a threat to the financial system or the ecosystem or financial institution saw fintech as a threat. But today we have moved on to collaborate with the fintechs. They are helping banks and credit unions. They are helping to further the technology, further the ecosystem and bring innovative solutions. Them being fintechs, sometimes they are agile and nimble. They can move fast, they can build fast, and they can bring new and innovative ideas.
Rusiru Gunasena: So The Clearing House is very open. The network is very much open to fintechs, technology providers, payment service providers who are a critical part of the payment ecosystem. We are looking at whether it’s APIs, whether it’s open banking APIs and other technologies to make sure that we are staying forefront of those technologies as well and providing those capabilities for the technology providers because those are the things which the fintechs or the other payment service providers look for the ease of integration. How do I come live to the network within days, and how do we simplify? So if you look at The Clearing House for the last five years and now 60 in operation, we have simplified our onboarding process and can bring tens of. Tuitions. Live a day. Just pass. This Monday we bought ten institutions and Tuesday we brought 11 institutions live. That was a great achievement to pass the 400 mark. The teams are working very collaboratively together within The Clearing House and with the industry participants to make sure we stay up on that innovation and the efficiency of onboarding as well.
Jacob Hollabaugh: Yeah, it’s been a wonderful shift to see in the industry. And from some of the conversations we got to have on this podcast, to echo what you started that with, of where it used to be seen as all of these new people were strictly competitors out to bring down the financial systems of old, instead shifting to realizing they’re more of enhancers. If anything, most of them, a majority of them are coming to try to bring your products or solutions or big institutions, products or solutions to places that they have never been before, or connected to people or trends that they’ve never been a part of before. So it’s been good to see that in places like The Clearing House that embrace that and are willing to be open to the integration and the continued evolution definitely are the ones that continue to succeed. We touched on we’ve touched on a couple of different trends here in the last couple of minutes. So I’ll ask this open-ended to let you take it where you would prefer. What is if you could just pick one top trend, maybe viewed a different way, largest obstacle, but trend or obstacle in the next kind of half decade that you think RTP network clearinghouse needs to stay in front of? Is there one that stands out to you of like, we definitely need to be on top of this at the forefront of this, learning as much as we can? Any trend that stands out to you?
Rusiru Gunasena: I would say in the foreseeable future, the real-time payments is continuing to grow and going to evolve. We keep a close watch on some of the emerging technologies. The top one, I would say in my mind is safety and security. So we need to be ahead of the fraud or the scams and make sure that we take a multi-pronged approach to make sure customers, our financial institutions, the businesses are secure and sound. Whether it’s education, whether it’s deploying new technologies, whether it’s AI, or ML-driven fraud mitigation tools, we need to make sure that we are front and centre and at the forefront of it. I would pick that as the top, but among others, emerging technologies. We also keep an eye on what relations and policies evolve around whether it’s Cbdc crypto, whether it’s whether it’s open banking. We try to stay ahead of all that and make sure that we are front and centre of those as well.
Jacob Hollabaugh: Yeah, there’s certainly as there always has been, but it seems by the day and month and year, there’s so much to keep track with and so many new things, and it’s all moving faster and faster. And although that is the name of the game for you is speed, it is. It’s a lot to keep up with. The final question I have for you then, is what are you most excited about in the next 12 months? Whether it’s with RTP, The Clearing House payments world at large, looking out at the next year, what’s the most exciting thing for you?
Rusiru Gunasena: I would say it is the growth of the real-time payments, immediate payments. I would expect that the immediate or the real-time payment, real-time adjective to drop. It’s going to be just payments because the consumers and businesses alike are demanding today to have their goods delivered, whether it’s through Amazon or food delivered through Grubhub. Payments are going to be no different from that. When you look at the consumer behaviour shifting in that direction, so definitely the real-time growth is very exciting to me. To be a part of that journey in The Clearing House is very exciting, and we are doing a lot of exciting things within The Clearing House and with our participants to make sure we are at the forefront and helping their clients and customers to make sure they are at the forefront of that payment evolution eventually going to be just payments. No real. You don’t have to really say real-time payments, right? Yeah. So I think that’s what’s going to be and I’m very excited to be a part of it.
Jacob Hollabaugh: I love that and I hadn’t really thought that. Yeah, that’ll be an amazing day when it becomes we don’t need to have the qualifier anymore because it’s the expectation and the overwhelming, the thing that’s happening that payments means real-time, and the only way you need to add the qualifier is if you’re talking about some old system that isn’t in real-time anymore. So that’s a wonderful place to end on. This has been a real pleasure for those listening, who may either want to follow you or learn more about The Clearing House, keep up with everything that you’ve got going on. Where would be the best place for them to go? To find more.
Rusiru Gunasena: You can go to The Clearing House website and if you Google The Clearing House, you will come across the domain. And then there’s a lot of information. We have all the information in the public domain from the day we have gone live on that network. We have shared that information as well. Whether it’s the stats, whether it’s the growth, whether it’s the use cases. And we are always available for any conversations, brainstorming sessions, whether it’s a financial institution or a fintech to brainstorm on payment strategy and talk about real-time payments and how we can help and work together.
Jacob Hollabaugh: It’s amazing the openness and opportunity to integrate and collaborate and everything is definitely, I think one of the main reasons stand out reasons why that you can say you work for a place that has been around for as long as it has. So this has been wonderful. Thank you. We’ll link to those and more in the show notes below. So people you can just click right below on if you want to go check out more. Thank you so much for your time and knowledge today. I’ve greatly enjoyed getting to talk and hope to do it again sometime soon.
Rusiru Gunasena: Thank you Jacob.
Jacob Hollabaugh: If you enjoyed this episode and want to hear more, head on over to soarpay.com/podcast to subscribe on your podcast listening platform of choice. That’s soarpay.com/podcast.