On September 21, the Department of Justice cleared the way for a group of the twenty-four largest U.S. banks to create a real-time payment system that will permit immediate transfer of funds between financial institutions. The system was proposed by The Clearing House Payments Co., LLC (“TCH”), a joint venture between the twenty-four banks that hold approximately sixty percent of all U.S. deposits.
In a letter from the Antitrust Division, the DOJ acknowledged that collaboration between competitors can harm competition, but it expressed optimism that the venture could have a pro-competitive impact. “None of TCH’s currently-proposed rules seem to limit rivals’ ability to access [real-time payments] in a way that appears to be anticompetitive, although we note that TCH retains the right to change its rules at any time, and it has complete discretion over enforcement and implementation decisions,” wrote Andrew C. Finch, Acting Assistant Attorney General. “The department has no current reason to believe, however, that TCH will use RTP to harm the rivals of the TCH owner banks.”
The TCH proposal is largely in response to a 2015 call from the Federal Reserve, which sought a “ubiquitous, convenient and cost-effective way for U.S. consumers and businesses to make (near) real-time payments from any bank account to any other bank account,” a target the Fed outlined in its paper “Strategies for Improving the U.S. Payment System.” As we covered here, the Fed recently released an update to the paper, outlining its “Next Steps” to achieve the goals set forth in its 2015 missive.
According to its proposal, TCH intends to create and maintain a Real Time Payment (“RTP”) system that will provide real-time fund transfers between depository institutions for the first time in American history. The RTP system will permit depository institutions to engage in faster fund transfers for their customers and, according to TCH, will not interfere with existing payment systems. While TCH plans for end users with a bank account to make payments through the RTP system, those end users will not have a direct relationship with the system.
The DOJ noted in its approval letter that many countries already have similar systems, and “[t]he need for a faster payment rail is predicated on the value that end users get from real-time funds-transfer services, and the risks currently undertaken by banks and payment service providers that provide these services using existing payment rails.” With the advent of the new system, “RTP may also increase the variety of payment rails available to banks, payment service providers, and ultimately their end user customers.” The DOJ concluded its letter by giving TCH its blessing, writing that it currently has no plans to institute antitrust actions against the RTP proposal.