Introduction to Real Time Payments (RTP)
Real Time Payments (RTP) is a new technology that allows data and payment information to flow faster than ever. Unlike standard transactions, RTP transfers money and messaging simultaneously, increasing efficiency through automated information transfers. For enhanced security, a 3D secure payment gateway can be used.
How RTP Works
RTP involves the exchange of financial and identity verification data between two major entities:
The Biller
The Consumer
The process follows these steps:
The Biller makes a request for payment (RFP)
The Consumer submits their payment information
The Biller confirms receipt
The transaction is finalized on the Consumer's end
These steps occur rapidly in an RTP transaction.
The Demand for RTP
The growth of digital ecommerce and mobile technology is increasing the demand for real-time payment processing. Also known as instant payments, RTP offers new opportunities for many US financial institutions.
RTP is similar to Same Day ACH, which can process payments on the same day the transaction begins.
Benefits for ACH Payment Processors
Companies that accept ACH payments stand to benefit the most from RTP, primarily due to rapid information exchange. Key advantages include:
- Credit transfers exchanging remittance information
- RFPs supporting electronic invoices and billing
- Senders receiving payment receipts and status messages
The Clearing House (TCH) and RTP
The Clearing House (TCH), owned by some of the world's largest banks, launched its real-time payments system in 2017. TCH has partnered with MasterCard and Vocalink to develop this system, aiming to reduce payment processing time from days to minutes.
ACH Payments and Batch Processing
The Automated Clearing House (ACH) Network is one of the world's largest payment processing methods. It uses batch processing, where transactions accumulate throughout the day and process simultaneously in one batch, making the trades non-immediate.
The Push for Faster Payments
According to the Federal Reserve, most companies and consumers prefer instant or one-hour transaction clearance. In 2015, the National Automated Clearing House Association (NACHA) approved an amendment to accelerate payment processing.
Opportunities in Instant Payments
The improvements in payment processing create opportunities for retailers, financial institutions, and other businesses to enhance their infrastructure and improve their business models, services, and products.
Choosing the Right Payment Processor
It's essential to work with a reliable payment processor who can offer the best solutions for high-risk merchant accounts and secure payment processing. The right payment processing merchant service company can help businesses grow with new instant payment options.