A Guide to Understanding Real-Time Payments


Real-time payments (RTPs) have made it twice as easier for merchants to receive funds from their customers. They are not the regular online payments you can make through your phone or at the POS system in your favorite retail store. Real-time payments are unique, instant, and quite honestly, the future of modern-day trade.

Below we break down how these payments are being adopted around the world and some of their major perks.

What are Real-Time Payments (RTPs)?

RTPs are electronic or online payments that are processed instantly. These payment processing solutions allow people to transfer funds in a matter of seconds with the remaining balance being reflected in the payer’s account within that same time. Real-time payments are also available 24/7 regardless of holidays and weekends.

Good examples include The Clearing House’s RTP network and Japan’s Zengin. Through these payment systems, buyers don’t have to write checks or wait hours for direct bank transfers to get settled. As soon as they make a purchase, the transaction is processed immediately and a confirmation message is sent.

How Do They Work?

Real-time payment systems often use mobile applications to facilitate transactions. These mobile apps are fitted with the necessary digital infrastructure to connect banks, merchant accounts, and even other payment processing solutions such as Square.

Five parties are involved in every real-time payment transaction. There’s the payer, the payer’s bank, the RTP network itself and finally there’s the receiver and their bank. A good example is when a buyer makes a purchase, the payment is initiated and a request is sent to their bank to authorize the transaction.

Once the bank authorizes the transaction, the funds are sent through the RTP network and to the merchant’s bank. At this point, the buyer will receive a confirmation message of the amount of funds sent and their remaining balance while the merchant will get a message too, detailing the amount of funds received.

The Key Difference Between Real-Time Payments and Faster Payments

RTPs and faster payments may sound similar but they are quite different. Faster payments include Zelle, Nacha’s same-day ACH, and debit push transactions. These payments are faster than checks or traditional bank wires since they take only a few hours to get settled. But at the end of the day, they are not instantly processed.

This makes speed the main difference between real-time and faster payments. While most people choose to send money to their friends using Zelle or Zengin, businesses gravitate towards real-time payments simply because they’re faster.

Pros and Cons of Using RTPs

Real-time payments offer benefits such as:

  • They can boost customer numbers and improve sales by helping customers make faster in-store and online payments.
  • RTPs also reduce operational costs by lowering the amount of fees levied during credit card processing.
  • The risk for fraud which is seen in credit card processing and other online payments is significantly reduced in RTPs as well.
  • By integrating RTPs with POS systems and merchant accounts, businesses can also gain more insight into their total number of sales, invoices, and refunds. They can later use this information to get their financials right and improve underperforming areas.

RTPs have drawbacks as well. They include:

  • Real-time payments are processed instantly and most of them are irreversible. Leaving no room for error like this can affect a buyer’s financial situation if things are done in a hurry.
  • Additionally, RTPs require major technological changes and partnerships that are sometimes too expensive to meet.

The Future of RTPs

The future of real-time payments is bright. Customers still prefer credit cards and digital wallets. However, more banks are now offering RTPs, so in a few years we believe almost all major stores will be accepting them. We can’t tell for sure which businesses will be at the forefront of this new technology.

Retail stores will probably switch to RTPs to make it easier for customers to shop. And since E-commerce businesses already accept online payments, building RTP infrastructure will be easier and less time-consuming.


Speed is the driving force of today’s economy and more consumers are switching from cash to online payments. Real-time payments matter because they offer speed, security, and convenience. You don’t have to carry cash or wait hours for a payment to go through.

With real-time payment, you can shop wherever you are and go home with a smile on your face because banking has been placed in the palm of your hands.

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