Innovation and digital transformation have conditioned us to crave on-demand culture. Even checking for grocery stores, booking cab rides, and advertising on the internet are just one click away so we need a real-time payment! In short, we have created a new level of attainment for ourselves.
And now, COVID-19 forced the payment industry to accelerate and explore innovative concepts to advance the way payments are handled. When we choose the cross-border payment, it generally takes 3 to 5 business days to settle down the payment. The various issues that can arise between initiation and settlement is obscure. Afterall, customers want to access the payment in real-time!
Real-Time Payments (RTP) eliminate many of these issues and introduce a new way of attaining instant access to capital. However, adopting this new level of attainment (RTP) also has its challenges.
Adoption of Future Proof Payment System (RTP network) and COVID-19 Pandemic
A growing number of businesses and banks have instituted measures to limit banknotes and re-architect their infrastructures to accept real-time payments.
Currently, 46 countries are relying on instant payment schemes and half a dozen countries have announced to implement real-time payments before 2023. Instant Payments, Fast Money, Immediate Payments, Faster Payments, or Real-Time Payment; wherever you are in the world, you probably have a term for this network.
In short , it is an undeniable fact that real-time payments are wheeling the payment industry faster than any other payment initiative.
What is Real-Time Payment?
Debit cards, P2P apps, digital payments, or credit cards seem to be real-time. But they are NOT! The funds don’t actually get transferred using these payment methods right away. It normally takes up to 72 hours to clear and settle when processing through a credit or debit card. These online transactions are still processed through ACH (Automated Clearing House). Let us explain!
Though the ACH system processes the payment on the same day, payments are generally cleared in batches. This means that the funds won’t be available until the settlement process has been completed and the payment is cleared.
So, what exactly are real-time payments? It is a system that enables instantaneous money transfer between banking systems and banks. These payments have very tight SLAs (roughly 20/15/10 seconds) to complete the entire processing. This new term leverages liquidity, speed, reliability, customer satisfaction, and, doesn’t cost a cent to the payer or the payee.
In 2001, the real-time payment system was born in South Korea. By the end of the decade, this new technology was used throughout the U.K. and other parts of Asia. One can receive payment around the clock, 24/7/365, without any delay. In short, no sign of ”float.”
Time to Break the Wall of Real-Time Payments in the US
The Clearing House (TCH) brought the future payment initiative – RTP® (Real-Time Payments) Network – to the US in 2017. All federally insured depository institutions can incorporate this payment system to settle and clear payments instantly. The network helps financial institutions develop and deliver new innovative services and products to their customers.
It has been stated that the RTP network connected over 50% of all demand deposit accounts in the US and is expected to reach nearly all U.S. accounts in 2020. Government entities, businesses, and consumers can start using RTP technology to facilitate payments across the payment categories.
Road to Real-Time Payment
Our unified solutions present strong use cases, double down on security and fraud prevention, and build flexible technical infrastructures to position corporates and financial institutions in a world where payments are truly instant.