What are real-time payments?

by Tiffany Taylor and Christian Hibbard, Alacriti

Real-Time Payments (RTP – not to be confused with The Clearing House’s brand name RTP®) refers to payment rails (platforms or networks via which payments pass through) that share a few characteristics.

The first is in the name: they are real-time—or very near real-time—initiating, clearing, and settling in a matter of seconds. Real-time payment networks are ideally 24x7x365, meaning they are always online and available for a transfer. As a result, in order to connect to a RTP rail, the bank or credit union’s backend systems will need to be available 24×7.

“Open-loop” is another important characteristic of RTP—this means the payments are withdrawn directly from an account, rather than relying on a prepaid balance.

Finally, a data-rich messaging format like ISO 20022 is also necessary. Without this clear and nuanced form of information, it is more difficult to resolve errors, which leads to processing delays. Strong formatting standards also provide greater security to all participants in the network.

 

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