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What Are Real-Time Payments (RTP)?

Written by Keegan Chamberlin
February 16, 2022

Real-Time Payments (RTP) is a new payment method 40 years in the making. According to J.P. Morgan, “Real-Time Payments (RTP) combines immediate funds availability, settlement finality, instant confirmation, and integrated information flows–all in a payment made in seconds.” Businesses can now send payments instantaneously from their bank accounts, with the added security and convenience of immediate fund availability for their vendors. 


Development History of RTP

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Real-time payments are not a completely new concept – Japan developed the first RTP in the 1970s. And in 2019, Finextra revealed in its sixth annual Flavors of Fast report that up to 54 countries have access to real-time payment programs. The US still lags behind others in real-time implementation, but times are quickly changing. 

In the United States, real-time payment rails have been a project for over 40 years in the making. That project came to fruition in 2017 when many of the top global banking institutions, who are members of the Clearing House Payments Company, a banking association that dates back to 1853, came together and established a real-time payments system known as the RTP® network. This network has provided account holders with banking partners who support RTP to send RTP directly from their account to their payee’s bank account.


Why Utilize RTP?

The major benefit to RTP is that funds that are sent are instantaneously sent upon final confirmation, and those funds are immediately available to the payee. But there are many other benefits that RTP possesses that empower treasurers and financial professionals to manage their payments better.


Real-Time Payments Are Available 24/7

Compared to checks and ACH, which can take up to 1-2 business days to process and become available, payments made through RTP are available immediately to the payee. This makes RTP perfect for sending time-sensitive payments that you may catch last second, or you can’t afford to wait for processing for your vendor to receive the funds.


RTP Empowers Two-Way Communication Between Payer and Payee

With common payment methods that have come before RTP, payment would only flow one way: from payer to payee, ensuring lag times as communication had to take place outside of the payment system in order for settlement to occur. RTP completely changes this by sending critical data with the payments by setting up a two-way communication channel, enabling both the payer to its bank and from its bank to the payee’s bank.

With this bidirectional communication flow, RTP empowers:

  • Payment confirmation: When a payment is sent, businesses are informed that funds have reached the payee’s bank account
  • Request for payment: Vendors will be able to send a Request for Payment within an RTP in the future


Obtain More Control Over Cash Flow

With settlement and fund availability being instantaneous, you can have more control over when cash flows out of your bank accounts by making payments through RTP. Instead of having to wait several business days for payments to transfer and become available to vendors, you can send payments even on the day they are due with RTP with minimal fees compared to checks as according to Delloite within their research report, Economic Impact of Real-Time Payments, RTP cost about the same as non-instant electronic payments overall, at around $1.95 for 10 transactions per capita, which compared to checks at $2.79. 


The Future of RTP

While RTP is instantaneous and more secure than other payment methods, a lack of mass adoption is still a potential issue in the short term. RTP is still not available at all banking institutions nationwide. According to the Clearing House Payment Company, “[RTP] is currently accessible to financial institutions that hold 75% of U.S. demand deposit accounts (DDAs), and the network currently reaches 61% of U.S. DDAs.”

As RTP becomes steadily adopted in the coming years, it has several use cases that could change how businesses initiate and process payments. For businesses or individuals who need to make quick, time-sensitive payments either business-to-business, peer-to-peer, or employer-to-employee via payroll, RTP can revolutionize and streamline the timeline people expect to receive cash. And the less time you spend waiting for cash for vendors, that cash can be utilized to continue to grow your business. 


Initiate Real-Time Payments Directly Within the Trovata Payments App

Not only can you streamline your payments processes with RTP, but you can also manage all your payments in one secure platform with the Trovata Platform. Trovata’s Payment App empowers treasurers and finance professionals to make transfers and initiate payments via ACH, wire, and RTP using the bank API directly, eliminating the need for a third-party intermediary and additional fees. And with payment workflows and templates, you are empowered to implement governance directly within their instance, ensuring all payments adhere to the company’s signature authority matrix, treasury policy, and internal controls. 

Now live for all Trovata clients with J.P. Morgan, Wells Fargo, Silicon Valley Bank, and Bank of America accounts, you can empower your organization to initiate and track payments in one centralized place. Reach out to Trovata’s team of cash payments experts to discover how you can manage and streamline your organization’s payment processes today.

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