What are real-time payments? 

Real-time payments (RTP) refer to instant transfers of funds from one account to another, ensuring that the recipient immediately has access to the money. When a payment is approved, the payer's account shows the deduction of funds right away, providing real-time balance confirmation. Settlement times can vary but often take only a few seconds. Real-time payments are also known as immediate payments or instant payments because of their quick processing.

Once a real-time payment is made, it cannot be reversed, making it irrevocable. Unlike early systems that had restrictions on weekends and holidays, modern real-time payment systems operate 24/7, allowing transactions every day of the year.

How Real-Time Payments Work?

Real-time payments involve five main parties:

1. The person making the payment (the payer)
2. The payer's bank or financial institution
3. The person receiving the payment (the payee)
4. The payee's bank or financial institution
5. The real-time payment network that facilitates the transaction

 

Where are real-time payments used?

Nation	RTP Network(s)	Owner(s) / Operator(s)	Year(s) Launched
Australia	New Payments Platform (NPP)	Reserve Bank of Australia	2018
Belgium	SCT Inst	STET	2019
Brazil	– Sistema de Transferência de Fundos (SITRAF) – PIX3	Banco Central do Brasil (BCB)	– 2002 – 2021
Canada	– Interac e-Transfer – Real-Time Rail (RTR)	Payments Canada	– 2002 – Project launch in 2021
Chile	Transferencias en Líea (TEF)	Centro de Compensación Automatizado (CCA)	2008
China	Internet Banking Payment System (IBPS	People’s Bank of China	2010
Colombia	Transferencias YA	ACH Colombia	2019
Denmark	Straksclearing (also known as Express Transfers or RealTime 24/7)	Danish Bankers Association / Nets	2014
Finland	Siirto	Automatia	2017
France	SCT Inst	STET	2018
Germany	SCT Inst	EBA Clearing ECB	2017
India	– Immediate Payment Service (IPS) – Unified Payments Interface (UPI)	National Payments Corporation of India	– 2010 – 2016
Kenya	PesaLink	Kenya Bankers Association (KBA)	2017
Japan	Zengin System	Japanese Bankers Association	1973
Malaysia	DuitNow	Payments Network Malaysia	2018
Mexico	Sistema de Pagos Electrónicos Interbancarios (SPEIS)	Banco de México	2004
Netherlands	SCT Inst	ECB	2019
Nigeria	NIBSS Instant Payments (NIP)	Central Bank of Nigeria	2018
Norway	Straksbetalinger.	BITS AS	2013
Republic of Korea	– CD/ATM – Electronic Banking System (EBS)	Korea Financial Telecommunications & Clearings Institute	– 1988 – 2019
Singapore	– Fast and Secure Transfers – PayNow	The Association of Banks in Singapore	– 2014 – 2017
South Africa	Real-Time Clearing (STC)	Absa / Capitec / Bankserv Africa	2006
Spain	SCT Inst	ECB / Iberpay	2017
Sweden	BiR	Bankgirot	2012
Thailand	PromptPay	National ITMX	2016
United Kingdom	Faster Payment Service (FPS)	Pay.UK	2008
United States	–  Zelle – Real-Time Payments Network – FedNow	– Early Warning Services – The Clearing House – The Federal Reserve	– 2017 – 2017 – Project launch date in 2023

 

Benefits of Real-Time Payments 

Real-time payments offer many advantages for organizations:

1. Meeting customer demands for instant access to funds and convenient electronic payments.
2. Speeding up refund and disbursement processes.
3. Providing individuals with better financial visibility, reducing overdraft risks.
4. Giving businesses improved liquidity, accounting visibility, and cash flow management.
5. Introducing new services like QR payments and social payments.
6. Helping businesses expand into new markets and increase revenue.
7. Lowering operational costs by avoiding or reducing credit card fees.
8. Enhancing payment security with secure communication and authorization methods.
9. Improving business performance and reducing fraud risk by conforming to ISO 20022 standards for rich data transmission.

 

What's Fueling the Growth of Real-Time Payments? 

Real-time payments are experiencing rapid growth. In 2020, over 70.3 billion real-time transactions were processed globally, marking a 41% increase from the previous year, according to ACI Worldwide and GlobalData. While real-time payment systems have been around since the 1970s, their global adoption has surged in the last decade. The market for real-time payments is expected to grow at a rate of 23.6% annually from 2020 to 2025.

Factors Driving Real-Time Payments' Growth

1. Increased use of digital payments during the COVID-19 pandemic.
2. Government-led efforts to modernize payment systems.
3. Rising demand for convenient payment methods from consumers.
4. Inclusion of new players with access to real-time payment capabilities.
5. Improved digital services for seamless and fast payments.
6. Easy access to new payment systems through APIs and open banking.
7. Government initiatives to reduce cash usage.
8. Acknowledgment of real-time payments' benefits for the economy.
9. Consumer interest in alternative payment options.

What are some potential use cases for real-time payments?

 

Payment Dynamic	Potential Use Cases
Person to Person (P2P)	Repayments / remittances to family or friends
Government to Consumer (G2C)	Subsidies, tax refunds / rebates, government wages, pensions, social benefits, unemployment benefits, loans
Business to Consumer (B2C)	Bill payments (using Request to Pay), rebates, refunds, vouchers, legal settlements, insurance claims, employee wages, employee reimbursements
Consumer to Business (C2B)	Point of sale transactions, bill payments, medical co-pays
Consumer to Government (C2G)	Taxes, loan repayments, donations, registration fees
Business to Business (B2B)	Supplier payments, refunds, adjustments
Business to Government (B2G)	Taxes, registration fees, campaign donations
Government to Business (G2B)	Privatized services, tax rebates, government contracts

 

Real-Time Payments vs. Faster Payments

While both real-time payments and faster payments are quicker than traditional methods, they differ in speed. Faster payments can take a few minutes to a few hours to complete and are typically credited by the end of the next business day. On the other hand, real-time payments (RTP) are truly instantaneous, with no delay between deduction from the payer's account and availability to the payee.

Is there such a thing as real-time ACH?

No, there's no such thing as real-time ACH. Automated Clearing House (ACH) payments are faster than traditional methods but still settle in batches, taking at least a business day, even for same-day transactions. Real-time payments are truly immediate, unlike ACH.

What is FedNow, and why does it matter?

FedNow is a new real-time payment system being developed in the United States alongside existing systems like Zelle and The Clearing House’s Real-Time Payments Network. It offers round-the-clock instant settlement and integrated clearing functions. FedNow is important because it allows financial institutions to provide faster payment services to customers.

Thanks to features like enhanced connectivity, value-added services such as Request for Payment, convenient settlement options, and liquidity services. It's highly anticipated and essential for entities in the U.S.

How can I implement real-time payments?

To implement real-time payments, banks need to update their payment systems. This involves:

1. Investing in a platform that can process real-time payments and handle back-office tasks.
2. Ensuring existing digital services can support real-time payments.
3. Offering additional services that add value to customers.
4. Creating a gateway or connection to the central real-time payments system.

Techzert is a trusted partner for many organizations in implementing real-time payments. We specialize in providing software that helps banks, merchants, and billers launch new payment options quickly, comply with regulations, and offer services based on customer needs.

To learn more about how Techzert can assist your organization in experiencing the advantages of real-time payments, reach out to us today.