RTP (REAL-TIME PAYMENTS) in Money transfer APIs

Released in 2017, RTP payments provide merchants, consumers, and businesses with more flexibility in money transfers. Real time payments (RTP) is an exciting new payment system in the US.

What are Real-time Payments?

Real-time Payments (RTP) is a network platform facilitated by the ACH Automated Clearing House and Federal Reserve System. This platform allows all federally insured US depository institutions to use it to deliver faster, safer payments in the US. With the RTP network, financial institutions can enhance their digital service offerings for both retail and corporate customers.

A real time payment on the RTP network has the following characteristics:

  • RTP payments are live 24/7, allowing financial institutions to facilitate sending and receiving virtually instant payments at any time.
  • RTP payments are immediate payments, which means recipients receive a payment within seconds of transactions (with some exceptions).
  • RTP payments are payment certainty, which means that sending financial institutions won’t be able to revoke or recall a transaction once it has been authorized and submitted to the RTP network (but there is a process of communication for transactions sent in error).
  • RTP payments can be used by any size federally insured depository institution, granting ubiquity.
  • RTP payments also contain a rich messaging system for value-add products like bill payments or invoices.
  • The RTP payment is extremely convenient and can be integrated into existing payment processes.
  • RTP gives customers more Cash Flow Control, which can be particularly important for cash-constrained small businesses and consumers.
  • RTP payments are extremely adaptable with a flexible, evolving architecture.

Real-Time Payments vs. Faster Payments or Same Day ACH

Real time payments exist on its own RTP network and are distinct from other speedy payment services that the Clearing House Offers, such as Same Day ACH and other faster payment services.

The key difference is that RTP network payments clear and settle individually in real-time and are irrevocable, whereas same day ACH payments are cleared in batches and finally settle after the payments clear.

The same goes with Mastercard or Visa’s faster payment options, known as push payment options, that will message transactions in a matter of minutes or seconds. These transactions aren’t yet settled, which RTP payments are. Cleared and settled in real-time, RTP payments are the fastest and only real payment rail available in the US.

How Does RTP for Most Money Transfer APIs Work?

Once eligible, the amount of RTP payments allowed will be dependent on your total assets per financial institution. For example, if your total assets exceed $500 billion, then your estimated monthly RTP volume will be in the hundreds of thousands.

For owners of fintech apps, your RTP allowance will be dependent on the backing financial bank that you work with and other factors. Pricing for RTP payments is straightforward, offering a  single price for all participants, and there are no volume commitments, no minimums, and no volume discounts.

If your institution allows RTP payments, then you may notice very few changes in the processes. You would send an RTP transaction how you normally do; the biggest difference is that the money will appear in your account almost instantaneously, allowing you to move on with your day rather than check your bank account for the deposit.

Advantages of RTP Payments

As you might have guessed, RTP payments have significant advantages. Not only do customers not have to wait for payments, but they also facilitate payments at hours where standard ACH transfers aren’t available. After business or bank hours, on the bank and federal holidays, and weekends are now times where RTP payments can send money. And with low fees, you and/or your clients won’t lose out on this amazing financial feature.

RTP payments are the only option in the US for sending money instantaneously and can open up a new world of financial features.

RTP Use Cases

The Clearing House launched the RTP network in 2017 and continues to expand the usability of this service. Common use cases for RTP payments include:

  • B2B real-time transactions
  • P2P real-time transactions
  • Payroll
  • Request for pay (RfP)

P2P Features

Arguably, the ability to send P2P payments is a function that was significantly lacking before major P2P apps started their development. Zelle, CashApp, and Venmo quickly replaced cash, checks, and IOUs, making individual payment management far easier than ever before.

Consumers are increasingly adopting P2P payment apps.

  • 54% of consumers have used PayPal within the past year
  • Venmo was used by 14% of consumers in 2020
  • 13% of consumers used Zelle in 2020

With RTP network payments now available for P2P payment apps, we will begin to see more players in this market and more competitive features such as instantaneous money app to bank account transfers and lower fees.

B2B Features

Companies relying on outdated manual processes to make business-to-business (B2B) payments are now finding motivation through the RTPs available on P2P apps. There are several B2B use cases and perks for RTPs:

  • The ability to move rich data for actionable insights
  • Payment confirmation
  • Improved control over payment timing and expectations
  • Better liquidity management
  • Instant bill payment
  • Remittance data

More Payment Options on the Horizon

The introduction of the RTP network was the first new payment system announced in the US in 40 years. We can expect more changes coming from the US financial system, all designed for payment security and functionality.

For example, the FedNow service is expected to be released sometime in 2023 and 2025. FedNow is a current Pilot Program that is an instant payment service for individuals and businesses, providing another service for fast payments.

It’s clear that more merchants, banks, and consumers are realizing the value of money transfer features and more banking features. Therefore, more use cases and networks are bound to emerge.

Real-time payments are already valued, with Citizen’s Bank suggesting that 90% of business leaders are interested in real-time payments.

A 2018 Global Payments Insight Survey from Ovum and ACI Worldwide found that:

  • 80% of merchants, retail banks, and billing organizations favored real-time payments and open banking.
  • 92% of merchants and 82% of billing organizations with revenues of at least $5 billion expect to see customer service improvements as a result of real-time payments.
  • 84% of regional merchants, retail banks, and billing organizations anticipate customer service improvements from real-time payments.

Want to learn more about the RTP network and RTP in money transfer APIs? Reach out to our team at Sila.