The term “real-time payment” (RTP) is used to describe any account-to-account fund transfer that allows for the immediate availability of funds to the beneficiary of the transaction. Real-time payments offer a confirmation of funds via a real-time balance; once a payment is authorized, the payer’s account reflects the deduction of funds instantaneously. Though settlement timing may differ from one scheme to the next, it is often completed in a matter of seconds. For these reasons, real-time payments are also commonly referred to as immediate payments or instant payments.
All real-time payments are irrevocable, meaning once a payment is made, the payer cannot deauthorize the transfer. Though early RTP systems were subject to nightly, weekend and holiday restrictions, modern iterations make payments available 24 hours a day, 365 days a year.
How do real-time payments work?
All real-time payment transactions involve five parties:
The payer
The payer’s financial institution
The payee
The payee’s financial institution
The underlying RTP network
The real-time payment process itself is fairly simple:
Where are real-time payments used?
Real-time payments are used in all major regions of the world; you can view RTP adoption by country in the chart below.
Nation
RTP Network(s)
Owner(s) / Operator(s)
Year(s) Launched
Australia
New Payments Platform (NPP)
Reserve Bank of Australia
2018
Belgium
SCT Inst
STET
2019
Brazil
– Sistema de Transferência de Fundos (SITRAF) – PIX3
Banco Central do Brasil (BCB)
– 2002 – 2021
Canada
– Interac e-Transfer – Real-Time Rail (RTR)
Payments Canada
– 2002 – Project launch in 2021
Chile
Transferencias en Líea (TEF)
Centro de Compensación Automatizado (CCA)
2008
China
Internet Banking Payment System (IBPS
People’s Bank of China
2010
Colombia
Transferencias YA
ACH Colombia
2019
Denmark
Straksclearing (also known as Express Transfers or RealTime 24/7)
Danish Bankers Association / Nets
2014
Finland
Siirto
Automatia
2017
France
SCT Inst
STET
2018
Germany
SCT Inst
EBA Clearing ECB
2017
India
– Immediate Payment Service (IPS) – Unified Payments Interface (UPI)
National Payments Corporation of India
– 2010 – 2016
Kenya
PesaLink
Kenya Bankers Association (KBA)
2017
Japan
Zengin System
Japanese Bankers Association
1973
Malaysia
DuitNow
Payments Network Malaysia
2018
Mexico
Sistema de Pagos Electrónicos Interbancarios (SPEIS)
Banco de México
2004
Netherlands
SCT Inst
ECB
2019
Nigeria
NIBSS Instant Payments (NIP)
Central Bank of Nigeria
2018
Norway
Straksbetalinger.
BITS AS
2013
Republic of Korea
– CD/ATM – Electronic Banking System (EBS)
Korea Financial Telecommunications & Clearings Institute
– 1988 – 2019
Singapore
– Fast and Secure Transfers – PayNow
The Association of Banks in Singapore
– 2014 – 2017
South Africa
Real-Time Clearing (STC)
Absa / Capitec / Bankserv Africa
2006
Spain
SCT Inst
ECB / Iberpay
2017
Sweden
BiR
Bankgirot
2012
Thailand
PromptPay
National ITMX
2016
United Kingdom
Faster Payment Service (FPS)
Pay.UK
2008
United States
– Zelle – Real-Time Payments Network – FedNow
– Early Warning Services – The Clearing House – The Federal Reserve
What are the benefits of using real-time payments?
Real-time payments offer numerous advantages to organizations across all sectors, including:
Satisfying growing consumer demand for instant access to funds and more convenient electronic payment options, thereby enhancing the customer
Expediting the refund and disbursement processes
Providing individuals with greater visibility into their financial situation, reducing the risk of overdraft fees and similar penalties
Offering businesses greater liquidity, visibility into accounting and better overall cash flow management, thereby enabling them to better manage operational expenses and maintain positive vendor relations
Creating opportunities which bring new value-added services — such as QR payments social payments and Request-to-Pay — to market
Empowering organizations to optimize existing service offerings, service new markets and open up new revenue streams
Reducing operational costs by either paying lower credit card interchange fees or bypassing interchange fees entirely
Increasing payment security by enabling bidirectional communication within a secure system; introducing two-factor/multi-factor authorization, device binding and confirmation mechanisms; and offering more secure payment options, such as Request to Pay, which processes payments through verified channels
Improving business performance, enhancing operational efficiencies and reducing the risk of fraud by conforming to ISO 20022, which enables financial institutions to send rich data sets with each transaction
What is driving real-time payments’ growth?
According to research from ACI Worldwide and GlobalData, “More than 70.3 billion real-time payment transactions were processed globally in 2020, a surge of 41 percent compared to the previous year.” Though real-time payment systems have existed in some form since the 1970s, global adoption of RTP has dramatically increased within the past decade — in fact, the RTP market has a projected Compound Annual Growth Rate of 23.6 percent from 2020 to 2025.
There are numerous drivers behind this rapid expansion, including:
Increased reliance on digital payments amidst COVID-19 pandemic
Privatized services, tax rebates, government contracts
What is the difference between real-time payments and faster payments?
Though similar in nature — and often mistakenly used interchangeably — real-time payments and faster payments are not one in the same. Faster payments certainly post and settle more quickly than traditional payment methods, but they aren’t instantaneous, or even near instantaneous.
In fact, faster payments can take anywhere from a few minutes to a few hours to complete. As a general rule of thumb, faster payments are always credited by the end of the following business day.
RTP are truly instantaneous in that there is no interval between when funds are deducted from the payer’s account and made available to the payee.
Is there such a thing as real-time ACH?
Simply put, no, there is not. Automated Clearing House (ACH) payments are a form of faster payment, which means they post and settle payments in batches rather than in real time. Though faster than traditional payment methods, even same-day ACH transactions take a full business day to complete. While this is a significant improvement over traditional ACH transactions, which took three days to complete, it pales in comparison to the immediacy of real-time payments.
What is FedNow, and why does it matter?
The United States has two existing RTP systems — Early Warning System, LLC’s Zelle and The Clearing House’s Real-Time Payments Network — and one currently in development. This third real-time payments system, FedNow, is an interbank round-the-clock real-time gross settlement service with integrated clearing functionality and is intended to enable financial institutions to deliver end-to-end faster payment services to customers.
Thanks to its enhanced gateway, which supports system connectivity; value-added services, such as Request for Payment; convenient payment settlement options; and liquidity services, FedNow is a highly anticipated RTP system and will be a must for entities in the U.S.
The Federal Reserve is expected to launch FedNow in 2023; the official pilot program, of which ACI is a member, began in 2021.
How can I implement real-time payments?
In order to implement real-time payments, banks must first modernize their existing payments architecture. This includes investing in a platform capable of:
Supporting real-time payments processing and back-office operations;
Enabling existing digital touchpoints;
Delivering value-added services; and
Providing a gateway or endpoint to the central scheme
As the real-time payments partner of choice for countless organizations around, ACI Worldwide specializes in delivering software that enables banks, merchants and billers to bring new payment types to market at speed, adapt to shifting and regulatory mandates and rapidly launch new value-added services according to consumer demand.
Our ACI Enterprise Payments Platform processes 50% of the U.K.’s Faster Payments, 75% of Hungary’s AFR transactions, and is the core processing infrastructure for Malaysia’s Real-time Retail Payments Platform and STET’s real-time payments platform. ACI also serves on the U.S. Faster Payments Council, is a member of the ISO 20022 Real-Time Payments Group and the European Payments Council’s Instant Payments Technology Group, and was named as a participant in the FedNow pilot program.
50%
of the U.K.’s Faster Payments are processed by ACI’s Enterprise Payments Platform
75%
of Hungary’s AFR Transactions are processed by ACI’s Enterprise Payments Platform
To learn more about how ACI Worldwide can help your organization realize the benefits of real-time payments, contact us today.
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