Real Time Payments: Preparing your business for RTP

Keeping up with the payments landscape is becoming a bigger challenge. Instead of just cash or credit, consumers and businesses today have more options than ever to send or receive funds, including instantly settling Real-Time Payments (RTP).

To stay competitive, businesses need a deep understanding of what RTP is, its benefits, RTP's impact on banking, and how to implement it. The road to Real-Time Payments is just beginning, making now the time to better understand how it fits into your organization. 

What are Real-Time Payments (RTP) in banking? 

RTP, which stands for "Real-Time Payments" is a payment rail developed by The Clearing House (TCH) that allows for real-time, 24/7 processing of electronic payments between financial institutions. The RTP network provides near-instantaneous settlement of funds, enabling consumers and businesses to send and receive payments quickly, securely, and conveniently. 

RTP transactions are generally completed within seconds, making them ideal for time-sensitive transactions, including loan disbursements or gig worker payments from apps like Lyft and Upwork. Another core benefit of RTP is its affordability compared to wires or credit cards. Banks charge by transaction, and RTP costs between $.01 and $2 per transfer, depending on the type of transaction. Note that this is the fee charged to banks—the fees charged to RTP users are likely marked up and vary by bank and use case.  

RTP is becoming an increasingly popular payment option for consumers and businesses alike.  In 2024, payment value on the RTP network increased 94% from the previous year, while volume surged 38% to a total of 343 million transactions.

However, RTP payments face stiff competition from traditional ACH payments, the newer same-day ACH payments, and the FedNow program. 

Note: While often used interchangeably, RTP is not an acronym for all real-time payments. Rather, RTP is a specific payment rail, Real-Time Payments (RTP) offered by The Clearing House. FedNow also powers real-time payments but is a different payment rail.

Credit vs debit—what's the difference? 

There are two core types of payments: credit transfers and debit transfers.Credit means the payment is ‘pushed’ from one account to another, while debit means the payment is ‘pulled’ from an account. 

Say you want to purchase a bike and need to make the payment to a bike shop. You tell your bank you want to pay (often by swiping your credit card), and your bank "pushes" your money to the store's account. That is a push or credit payment. Debit payments occur when someone sends an instruction to your bank to remove money from your account to pay an amount you owe. A simple example of a debit or pull payment is setting your electric bill on auto pay—you've authorized the utility company to take money from your account every month. 

Technically, the RTP system is credit only. If a business wants to perform the equivalent of a debit/pull payment via RTP, they would use a feature called Request for Payment (RfP), which is actually sending a request for the payer to initiate a credit transfer. 

Managing the risk of instant debit payments is challenging—you wouldn't want just anyone to come into your account and pull cash out. RTP’s RfP feature is similar to an invoice, which you can choose to pay or not. However, RfP has limitations due to increased risk and requires more information to process, and is not supported by all banks.  

How do RTP payments compare to other payment rails?  

In the payment landscape, financial institutions and consumers constantly seek faster and more efficient ways to transfer funds. So, how do RTP bank transfers compare with other payment rails?

ACH is a traditional payment rail that allows US financial institutions to send money between accounts–not to be confused with wire transfers. Like RTP, ACH allows for electronic bank transfers—however, the similarities stop there. ACH is bi-directional, meaning you can use both push (credit) and pull (debit) payments. 

RTP payments are strictly credit transfers, meaning funds are pushed from one account to another. Debits (pulls of funds) that are common for ACH bill payments can be handled through RTP’s Request for Payment functionality, although they function more like an invoice than an auto-debit. While the RfP feature has gained popularity, it’s still less common. 

Other differences include operating hours, cost, and availability. ACH transactions only settle on business days during banking hours, while RTP transactions settle 24/7. Standard ACH fees are much cheaper than RTP, and ACH also has wider availability than RTP, as all US depository institutions can use ACH, compared to 71% of US demand deposit accounts (DDAs) with RTP. 

Another key difference between RTP and ACH is the ability to revoke payments. ACH payments can be reversed automatically in some cases, while RTP payments cannot. Once an RTP is received, consumers or businesses have no automatic method to have those funds returned (outside of a manual request to return the money, which may or may not be honored). ACH and RTP payments can both fail. However, RTP payment failures are typically immediate, while ACH returns can take several days. 

FedNow launched in the summer of 2023 and is an entirely separate payment rail from ACH or RTP. While it has many similarities to RTP, it is run entirely by the US Federal Reserve. It serves as a platform for financial institutions to build their own real-time payment solutions. Unlike ACH and RTP, it is not run by The Clearing House. Similar to RTP, FedNow processes payments in real time, 24/7. 

FedNow does support requests for payments, similar to RTP. While it is growing, coverage for FedNow is lower than RTP or ACH, with just over 1400 financial institutions opting into the system. However, as a newer payment rail, this will likely continue to grow.  

Compared to traditional payment options, like credit cards, RTP stands far apart. Credit cards come with high transaction fees, though they are nearly universally accepted. However, not all consumers have credit cards, and those that do may not want to use them for all transaction types, which is why methods like RTP, ACH, and FedNow are gaining in popularity.

What banks offer RTP in the United States?

Currently, more than 1,000 US financial institutions participate in the RTP payment system. The full list of RTP network banks can be found on The Clearing House website. Similar to FedNow, RTP coverage is constantly growing as new financial institutions agree to participate. Currently, around 70% of financial institutions are Real-Time Payment banks, including notable institutions such as: 

• American National Bank

• JD Bank

• Bank of America 

• Century Bank 

• Navy Federal Credit Union 

• CitiBank

• Citizens National Bank 

• PNC Bank 

• Signature Bank 

• Fifth Third Bank 

Many local credit unions and banks also participate in RTP bank transfers, including State Bank of NW Missouri, Jacksonville Fireman Credit Union, and Indiana University Credit Union. 

4 steps to prepare your business for Real-Time Payments

Implementing Real-Time Payments (RTP) can help modernize your payment infrastructure and improve the customer experience. From understanding the use cases to managing returns, preparing your business for RTP will ensure a seamless transition. Keep in mind that you are adding RTP as a payment option, but not replacing other payment methods like ACH and credit cards. In fact, you may only want to offer RTP for the most popular use cases. 

1. Understand RTP payment use cases

RTP can currently be used in a variety of use cases, including instant payroll processing, loan disbursements, and merchant payouts. This means employees or customers can receive payments or paychecks immediately instead of waiting several days for the funds to clear. Gig economy payments can also benefit from RTP. We'll explore the use cases in detail in a further section. 

2. Decide if RTP makes sense for your business 

When deciding whether RTP payments make sense for your business, it's important to consider the value it can deliver—outside of pure dollars and cents. One potential benefit is improved customer satisfaction, as the ability to make and receive payments instantly enhances the customer experience. Another potential benefit is higher activation rates, as customers may be more likely to use your services if they know they can receive RTP payments quickly. RTP may even lower customer churn rates by reducing payment friction. 

Start by evaluating your current payment processes and identifying pain points. You can also look at the payment preferences of your customers and assess whether offering real-time payments would provide a competitive advantage. Consider the cost and complexity of implementing RTP as well as any potential security risks. By weighing the potential benefits and drawbacks of RTP, you can make an informed decision about whether it's the right payment solution for your customers—and your business. 

3. Ensure you have fallback options

One potential challenge of RTP transfers is that it doesn’t cover all financial institutions. While more financial institutions continue to join every year, it’s important to have other payment rails to fall back on. Ideally, you can work in an automated switch to ACH for customers whose financial institutions don’t support RTP. Transfer, Plaid’s payment processing product, has this fallback structure in place as part of its multi-rail orchestration flow. 

4. Make adjustments for security 

Security is crucial for the Real-Time Payments (RTP) network because of the immediate nature of these transactions, plus the fact that they cannot be returned. This speed also means that there is less time to identify and stop fraudulent activity, making it critical to have robust security measures in place.

Real-Time Payment network use cases 

Real-time Payments offer the advantage of immediate transfer, making them accessible and reducing processing times. This makes them suitable for a range of financial transactions in today's fast-paced world. Let's explore the use cases in more detail. 

Instant payroll 

Employers can use RTP transactions to offer instant payroll payments to their workers, providing greater financial flexibility to workers. Imagine a retail worker who works a long week. Come payday, they don't have to wait two or three days for their paycheck to process; rather it's instantly available in their account. 

Instant payouts for gig economy workers

Imagine a ride-share app driver looking to earn extra money to cover an unexpected bill or purchase presents for an upcoming holiday. They work four hours, providing a total of 15 rides. At the end of their shift, they select "Get paid now" in the app, and the funds are immediately deposited in their bank account for a small fee. That is the power of RTP payments. 

Instant loan dispersals 

Another use case for RTP transactions is loan dispersals, especially for emergencies. For example, a parent faces a large car repair bill. Without reliable transportation, they cannot get their child to school or themselves to work. They apply through a fintech lender for a $500 loan to cover the car repair cost. After verifying their identity, the loan is approved and the funds are immediately deposited in their account. The parent can pay the repair bill immediately and have their car fixed. 

Refunds and warranties 

Manufacturers can use RTP payments for refunds and warranties, especially for larger-ticket items. Imagine a person who purchases a stove for their home. After two months, the stove stops working. Rather than waiting weeks for a check or days for ACH to process, they contact the manufacturer, provide pictures of the broken stove, and immediately have money in their account to purchase a replacement.  

B2B payments 

Imagine a manufacturer who needs parts to build a toy. They send a request to their supplier, who delivers the parts a few business days later. Upon arrival, the toy manufacturer immediately sends payment to the supplier using RTP. This saves time on processing, reduces accounting costs, and helps them build a stronger relationship with their supplier, who trusts they’ll issue faster payments. 

These are just a few use cases for RTP payments. The speed and convenience of this payment rail are ideal for times moving money is time sensitive. Other use cases might include emergency fundraising following a disaster and government benefit dispersal.

Real-time payments and multi-rail strategies are the future 

The increase in RTP and Fednow usage are creating a shift in the payment landscape. As the adoption of newer payment rails increases, there are likely to be even more use cases and platforms than we can currently imagine. Looking to the future, RTP transfers will likely expand into new areas, including home equity line of credit (HELOC) disbursements and merchant customer service payments.

There is one certainty about the future of payments—customers want more payment options. This means the future of payments is going to be faster and multi-rail. 

→ Learn how Plaid Transfer can prepare you for the future of bank payments via a multi-rail (ACH, RTP, and FedNow) strategy