Real-Time Payments, or RTP (not to be confused with The Clearing House’s brand name RTP®), refers to payment rails—platforms or networks through which payments pass—that share a few characteristics.
The first is in the name. They are in real time—or very near real-time—initiating, clearing, and settling in a matter of seconds. Real-time payments networks are ideally 24x7x365, meaning they are always online and available for a transfer. As a result, in order to connect to an RTP rail, the bank or credit union’s backend systems will need to be available 24×7.
“Open-loop” is another important characteristic of RTP. This means the payments are withdrawn directly from an account rather than relying on a prepaid balance.
Finally, a data-rich messaging format like ISO 20022 (the global standard for electronic data exchange in monetary transactions) is also necessary. Without this clear and nuanced form of information, it is more difficult to resolve errors, which leads to processing delays. Strong formatting standards also provide greater security to all participants in the network.
Current examples of RTP networks include the RTP network from The Clearing House (TCH) in the U.S., UPI in India, Faster Payments in the UK, and PIX in Brazil. The terms “instant payments,” “immediate payments,” and “faster payments” are also sometimes used interchangeably to refer specifically to real-time or near-real-time payments rails.
Real-Time Payments in the U.S.
The RTP Network from the Clearing House
Launched in 2017, the RTP network was the first of its kind in the United States. It is developed and operated by The Clearing House Payments Company L.L.C. (PayCo), which is privately owned by a group of the world’s largest banks. It currently reaches 70% of all U.S. demand deposit accounts held by U.S. financial institutions, accessible by 90% of DDA accountholders. Access is available to all federally registered depository institutions, either via a direct connection or a third-party service provider (TPSP).
Financial institutions with the resources to make their backend processes compatible with the network can connect directly, but others may need to use a TPSP. Such providers specialize in complex and resource-intensive infrastructural issues like ensuring 24x7x365 payment processing. As with all specializations, this makes TPSPs more efficient. The current cap for an RTP payment or transaction is $1,000,000, with lower limits sometimes set by connected institutions.
The FedNow® Service from the Federal Reserve
The FedNow Service, launched in July 2023, is the Federal Reserve’s real-time payments network, offering 24x7x365 instant payment capabilities. Operated solely by the Federal Reserve Banks, FedNow allows for an immediate clearing and settlement between participating financial institutions (much like The Clearing House’s RTP network). The initial rollout began with support for core features like credit transfers, request for payment (RFP), as well as liquidity management tools. While focusing mainly on basic use cases in its early days, the service is expected to expand over time.
The FedNow Service participants, beginning in Summer 2025, will be able to set custom limits to better align with their business needs and risk tolerance. In addition to this, FedNow will also be increasing its transaction limit from $500,000 to $1 million. As FedNow expands, it’s positioned to increase competition, drive broader RTP adoption, and enhance payment system resiliency in the U.S.
Common Questions About RTP
Even if you’re fully versed in payments lingo, there are some overlapping terms that it helps to clarify. Although the industry communicates the benefits of RTP to end-users and interest is increasing, consumer education still has a way to go. The meanings of terms can depend on who’s using them as well as the country they are being used in.
Faster Payments is a blanket term that, in the U.S., refers to an accelerated payment rail. Examples include same-day ACH, real-time payments, Zelle, push-to-card, and others. They are advocated for by the US Faster Payments Council. In the U.K., Faster Payments refers to one of their actual payments networks.
Is ____ a real-time payment?
Mobile P2P Payments
Not really. Not yet, at least. Apps like Venmo and Cash App offer instant transfers between users—but only as long as money is moved within that app’s payment system (closed-loop). As soon as a consumer or business wants to access their cash outside of the app, another rail will be deployed, typically ACH. Some vendors, however, are eyeing real-time payment methods to facilitate transfers between eWallets and consumer bank accounts. This won’t make mobile wallets themselves open-loop but would allow for a more seamless connection to an open-loop system, like RTP.
Zelle
Kind of! Operated by Early Warning Services LLC, a company owned by several prominent U.S. banks, Zelle is an independent transfer service linked to many banks and credit unions. It has recently been integrated with The Clearing House’s RTP network, which allows payments sent using Zelle to be delivered by the RTP network. If the payee or payer financial institution is not connected to the RTP network, then it still settles in minutes via Zelle’s own network but is not technically real-time on the backend.
Wire Transfer
Kind of. Typically reserved for low-volume, high-value transactions, wire transfers have an instant settlement time. For this reason, they are referred to as real-time gross settlement, or RTGS, transactions. Despite the similarities, the difference is a practical one: real-time payments are ideal for high-volume transactions, whereas wires are used for high-value transactions. You might use RTP to send money to a family member or pay rent, while wire transfers make more sense for real estate transactions or settling estates.
Same Day ACH
No. While same-day ACH payments are an improvement over regular ACH transactions, they only shorten the three-day window to one. More importantly, they are batched, so rather than being individually processed like RTP or wire transfers, they are all compiled and settled together at the end of the working day, meaning payments initiated after an institution’s cutoff window won’t be processed until the next business day.
Push-to-Card
Almost. Push-to-card leverages existing card networks but reverses the flow of information so that funds can be sent to a debit or credit card rather than from one. Transactions can settle in minutes—which is fast—just not as fast as via RTP.
Paper Checks
What? No!
Benefits of Real-Time Payments
There are myriad benefits to using real-time payments across every level of the financial system. The example most familiar to Americans are disbursements from the U.S. government, such as stimulus payments and benefit payments. The ability to send money directly to consumers electronically saves a huge amount of money on printing and mailing and helps eliminate printing errors like misspelled names. Electronic disbursement also speeds time to payment for many who rely on such payments for critical living expenses.
Ready to See Real-Time Payments Work?
The good news? Real-time payments aren’t a future promise anymore—they’re already here, and they’re here to stay. With thousands of financial institutions connected to TCH’s RTP network and growing adoption of the FedNow Service since its 2023 launch, real-time payments have and continue to become a core part of the U.S. payments ecosystem, reshaping everyday transactions for businesses and consumers alike.
Learn more about real-time payments in the webinar, Real-World Experiences Offering Instant Payments: A Credit Union and Bank Panel Discussion.
*This is an update on an original post published September 2022
Alacriti’s centralized payment platform, Orbipay Payments Hub, provides innovation opportunities and the ability to make smart routing decisions at the financial institution to meet their individual needs. Financial institutions can take full ownership of their payments and control their evolution with ACH, Wire, TCH’s RTP® network, Visa Direct, and the FedNow® Service, all on one cloud-based platform. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.
