Since The Clearing House raised its real-time payments transaction limit from $1 million to $10 million in February, outcomes have been favorable. Bank of America notes that transactions exceeding $1 million now represent over half the total value of U.S. real-time payments processed for corporate clients.
The RTP network’s transaction ceiling was capped at $1 million since April 2022, after it was lifted from $100,000. Competitor FedNow intends to escalate its limit from $500,000 to $1 million later this summer.
Among the first financial institutions to empower corporate clients to utilize the network’s upper transaction limit, BofA has witnessed growth driven by discovering new applications, especially in business-to-business payments.
Room for Growth in B2B
By July 2024, businesses comprised approximately 80% of RTP transactions. However, only about 5% of these payments went directly between businesses, pointing to considerable potential for higher-dollar transfers within the business ecosystem.
“Businesses can instantly remit payments to suppliers, contractors, and other vendors upon receipt of goods or services,” explained Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “This enhances inventory management, cash flow, supply chain operations, and overall payment efficiency. Uses such as payroll and real estate transactions also stand to gain from the expanded RTP transaction limit.”
Good for the Industry as a Whole
BofA’s move should further enhance the use of U.S. real-time payments.
“These developments are highly beneficial for the industry at large,” stated Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research. “There’s a tendency to keep new applications of emerging solutions like real-time payments confidential out of fear of aiding competitors. However, by educating the broader ecosystem, similar use cases are uncovered, thereby increasing overall demand for these products.”
The announcement also validates RTP as a dependable alternative to traditional wire transfers for businesses that have traditionally preferred them.
“Large players like Bank of America embracing RTP for high-value transactions such as closing payments indicates they’ve successfully implemented measures to ensure RTP’s security is on par with wires,” Thomas commented. “The immediate and significant surge in usage when the limit was raised to $1 million underlines strong demand for this service as a wire transfer substitute.”