5 things to know about real time payment processing
Real time payments (RTP) are changing the landscape for transactions at all levels. This article will explore what real time payments are as well as everything you need to know about RTPs as more financial institutions adopt this model of faster payments.
What are real time payments?
RTPs are 24/7 instant electronic funds transfers that can be initiated within a multitude of channels. A requestor of funds can initiate a new payment, and within seconds, funds can be made available in the provided bank account. The initiation can be completed through various technology sources, including smartphones, the web, or tablets.
Additionally, RTP technology includes the function of providing immediate notification to payers and payees. RTPs allow for financial exchanges beyond the typical hours for financial institutions and banks. Transactions can be implemented on weekends and after hours, or whenever is most convenient for the parties involved. As a result, RTPs have the potential to revolutionize the payment processing field. In fact, some would argue that this has already begun and that RTPs are here to stay.
What you need to know about real time payments
As RTPs gain traction, there are five important things you should know about this new system in payments innovation.
1. Real time payment systems were first developed in Japan in the 1970’s.
While the concept of RTPs first became known in Japan in the early 1970's, the technology did not truly take hold until the large-scale adoption of cell phones and the technical capabilities of high speed data and connectivity. The United States is newer to this type of payment solution and has begun rolling out platforms and technologies to enable RTP functioning.
The Clearing House launched the RTP network in 2017. In 2019, the Federal Reserve declared that they were in the process of developing an RTP rail entitled FedNow, which is expected to fully launch in 2023. Pilot testing of FedNow began in January 2021, with hundreds of financial institutions testing the payment platform.
2. There are five categories of real time payments.
The five categories of RTPs include:
- B2B (business to business)
- B2C (business to consumer)
- B2C (consumer to business)
- P2P (peer to peer)
- P2P cross border (peer to peer cross border)
3. The value of real time payments are continually increasing.
4. Real time payments increased during COVID-19.
5. Real time payments processing is one of the fastest developments in the financial industry.
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