Real-Time Payments or “RTP” refers to payment rails (platforms or networks via which payments are made) that share a few characteristics. The first is in the name: they are real-time, or at least very close—initiating, clearing, and settling in a matter of seconds. Real-time payment networks are ideally 24x7x365, meaning they are always online and available for a transfer. As a result, in order to connect to a RTP rail, the bank or credit union’s backend systems will need to be 24×7. “Open-loop” is also an important characteristic—this means the payments are connected directly to a personal account, rather than relying on a prepaid balance. A data-rich messaging format like ISO 20022 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 even “fast/faster payments” are also sometimes used interchangeably to refer specifically to real-time payments rails.
This can get very complex very fast, so let’s hone in on what’s most relevant in the U.S.continue reading »