3 ways to make practical use of real-time payments

As new, faster payment technologies have evolved and adoption has grown, businesses continue to identify ways that instant payments make a real-time impact. Explore the ways instant payments through the RTP^® network are driving payments innovation. The addition of the FedNow^SM Service in July 2023 expands instant payment availability.

In the past few years, the idea of real-time, instant payment processing in the business world has evolved from theoretical to practical. Now that consumers regularly pay bills online, make touchless transactions at stores and send money to friends via cash apps, people expect speed. Businesses are moving down a similar path as they begin to realize they need to keep up with the pace of their customers.

The RTP network is one of the options that was developed to fill this need. In fact, businesses have discovered a number of scenarios where features like digital request for payment and immediate settlement help them drive payment transformation.

RTP and the faster payments evolution

Simplifying payment processing is not a new goal for businesses, even going back 10 or 15 years. Without a digital infrastructure, though, that all felt like an unattainable dream rather than a tangible reality. The stakes changed when technology advanced and support across the financial industry grew, including initiatives from the Federal Reserve like the Faster Payments Task Force, which began assessing the digital payments landscape in 2015.

In the ensuing years, a variety of faster payments gained momentum with the push to modernize the U.S. payment system, including Same Day ACH, push-to-card and RTP. The Clearing House launched RTP in November 2017. The network has rapidly expanded since then, now reaching 65% of U.S. Demand Deposit Accounts (DDAs). Aligned to their task force recommendations, the Federal Reserve is launching another instant payment option. FedNow^SM Service begins its rollout in July 2023.

The digital transformation of payments promotes an expansive approach to changing the ways companies do business, but the reality so far has been incremental gains, largely due to some restrictions. As a core piece of streamlining sending and receiving payments, RTP payments move with speed, efficiency and certainty. With the increase to $1 million for payments on the RTP network, the same benefits of the previous $100,000 mark can be multiplied. Across industries and organizations, businesses are turning to higher-value transactions with RTP as a way to streamline and optimize payments more – well-beyond an increment. 

While RTP has grown since its initial launch, it has also evolved. Enabling Request for Payments (RfP) for consumers, added to the existing functionality for businesses, delivers increased opportunities for both speed and efficiency. Now, businesses are discovering new ways to leverage RTP’s immediate payments, 24/7/365 availability and data-rich transaction information. All these capabilities also align to the global ISO20022 standard for easy and swift integration.

Real-time research on real-time payments

New research from U.S. Bank shows the rise of real-time payments across the country and improved business results for the first wave of early adopters. Gain insights into how innovative companies are using real-time payments to accelerate their digital transformation.

See our survey of 1,000 finance leaders >

When real-time payments really make a difference

As adoption grows, so does the understanding of situations where the increased speed and functionality of RTP and RfP just make sense. In a world that moves as fast as a mouse-click, here are some areas where businesses are seeing the benefits.

1.     Provide customers immediate access to funds

Example: Emergency disbursements

Someone experiencing a car accident or home fire may need an urgent car rental or a hotel to stay in for the night. When the insurance agent says they're issuing an advance to cover the initial expenses, no one wants to wait for a check to arrive in the mail or even an ACH to clear in their checking account. The agent can disburse those funds in seconds with RTP, giving immediate availability to the payee in their personal banking account, even on nights, weekends and holidays.

This faster access and 24/7/365 availability can become a differentiator for a business. Or in the future, at the very least, customers will begin to notice when their money is delayed, especially when they’re experiencing a crisis that requires an immediate response or they’re expecting life-changing amounts.

Similar scenarios: cash advances, loan proceeds, large dollar payouts

2.     Move money efficiently

Example: Transactions with suppliers and trading partners

In today’s world of supply chain challenges, using RTP to pay suppliers can give businesses an advantage in terms of shipment and delivery. The 24/7/365 access and real-time settlement mean funds are available immediately, even on nights, weekends and holidays. This can improve overall business relationships, especially with trading partners

RTP allows the ability to manage cash flow, while taking advantage of supplier discounts. Transmitting the ISO20022 standard data also allows for better integration with accounting systems and easier reconciliation. Although the speed, efficiency and availability of RTP improve many payments, the benefits are magnified when applied to a higher number of transactions. 

Similar scenarios: move funds to other businesses or your employees like payroll and bonus payments

3.     Support time-sensitive transactions

Example: Paying bills on the day they’re due

Some payments are time-sensitive and can’t wait hours or days with delays in posting. Whether it’s a consumer trying to avoid late fees or a treasurer trying to manage cash flow, time really can mean money for some people. RTP is available for immediate payment and confirmation at any time of day or night, which gives payers the ability to wait until the last second to pay a bill or invoice.

This added certainty allows more people and businesses to confidently pay bills at the last second, and even gives businesses the ability to make payments to their payees that are available in their bank accounts immediately, 24/7/365.

RTP isn’t restricted by deadlines or normal business hours, ensuring money delivery as soon as the transaction is made with immediate receipt confirmation and no guesswork.

Similar scenarios: medical bills, consumer payments to businesses

RTP is one piece of the payments puzzle

With technology changing so quickly and so many faster payment options jumping to the forefront, it’s important to match the right payment to the right situation. There is a time for fast and a time for more traditional payment methods.

RTP helps businesses the most when paying in real-time matters, any day, any time of the year with immediate settlement, data-rich messaging and 24/7/365 access. RTP is just one piece of the payment ecosystem businesses need to maintain pace with the rapidly changing landscape.

According to Adam Carter, vice president in the Faster Payments Group at U.S. Bank, “digital-based payments options are all going to look pretty fast when compared with, say, processing checks or paper-based invoicing, but there are so many opportunities for businesses to operate better – truly transform – when they’re leveraging RTP to its maximum potential,” he says, “and there’s a lot more at stake now.”

“Treasury and finance professionals who understand the prospective benefits to their organization of faster payments are better prepared to stay a step ahead as digital payments evolve,” he says. “We expect RTP to become increasingly embedded in the software that treasury and finance functions use every day, which will allow us all to reimagine and transform the movement of money.”

To learn how real-time payments are changing the way companies do business, visit our RTP® resource page, explore our survey of 1,000 American businesses, or schedule a call with a treasury management expert.