RTP
RTP - Real-time payments
Real-time payments are the newest payment rail in the us introduced by The Clearing House’s “RTP Network” in 2017.
- RTP payments are initiated and settled nearly instantl (2-3 seconds)
- Provide 24x7x365 access (incl. weekends & holidays)
- Supports “Push” payments only (a crediting transaction to the receiver)
- Transactions are irrefutable - they can not be reversed by sender
- Provide bilateral communication allowing payment confirmation to both parties
- Particularly useful for many B2B use cases…even removing credit risk from the equation…
- Uses ISO 20022 payments messaging standard
- Moves payment data along with the funds => game-changer for getting payment data into ERP systems
- Used predominantly for P2P & B2C (gig workers) transactions ….B2B use is starting to tick up, esp since begin of pandemic
- The payer is always in control - up to them when and if they want to pay - this helps to reduce fraud and errors
Quick Stats as of 2020
- 130+ FI’s in process of implementing RTP’s
- 88% of US banks view RTP as essential part of payments offering
- Over half of demand deposits in the US are connected to TCH’s RTP Network
- 56 countries have live RTP rail, up from 14 countries six years ago
B2B Benefits of RTP
- Certainty of payment
- Improved Cashflow
- Ease of managing finances
Supported message types:
- Credit Transfer: the only way funds can be transferred on TCH RTP, a credit push
- Request for Payment: prompts a user to send a credit transfer
- Payment Acknowledgement
- Request for Information and Response to RFI
- Stand-Alone Remittance Advice
Payment flow example:
- A consumer authenticates themselves through their bank app/website and initiates a payment. (ex. to make hospital payment)
- The payer’s bank creates a message and sends it to the RTP network which is validated by the network and forwards to the receiving FI (the hospital’s bank).
- The receiving institution either accepts or rejects the message. (ex. wrong account number)
- If the receiving institution accepts the message, it immediately sends a message back to the sending institution saying the payment has been accepted.
As that process happens, in the background, The Clearing House settles the transaction in real time, using a joint account at the Federal Reserve in New York that participating banks must prefund and keep above a certain minimum.
- Each real-time credit transfer costs the sending institution 4.5 cents
P2P Payment Apps
P2P payment apps have gradually integrated with the RTP Network
- Paypal - 2019 - Partnered with JP Morgan (using JP Morgan’s RTP Network access) to transfer funds from a paypal balance to a bank.
- Venmo - Aug 2019 - capable of routing instant transfers through TCH’s RTP Network
- Zelle - Integrated on network early 2021
- In pilot stage (more than 200 FI’s involved), launch expected ~2023
- 2019 Announcement
- To be operated solely by the Federal Reserve Banks
- Distinguishing feature from RTP Network is FedNow will utilize the FedLine Network which provides payment and information services to over 10K FI’s
- Modernizing Our Payments System - Speech by CEO of Federal Reserve Bank of Cleveland
- Goals of 2nd RTP system:
- Systemic resiliency
- Drive competition in price & ease of use
- Encourage adoption
The payments flow should look like:
- A consumer initiates a payment.
- The sender’s bank screens the payment.
- The sender’s bank submits a payment message to the FedNow Service.
- FedNow validates the payment message.
- FedNow sends the contents of the payment message to the receiver’s bank.
- The receiver’s bank confirms or denies that it maintains the specified account.
- If approved, the FedNow Service debits and credits the appropriate master accounts.
- FedNow sends advice of credit to the receiver’s bank and an acknowledgment of completed settlement to the sender’s bank.
- The receiver’s bank immediately credits the receiver’s account.
Will not include alias-based payments (directories) at launch …but may be included later.
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