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Education

House produced the graph accompanying this article that
indicates RTP quarterly growth and usage:

Payments in

real time

By Ken Musante
Napa Payments and Consulting To reduce fraud, the service is meant for credits or
payments only where the entity making the payment
eal time payments (RTP) are initiated and instructs its financial institution to initiate payment. So,
settled instantaneously—well, very nearly while there is no authorization required, the payment is
so—24/7/365. The most common use case for irrevocable. Costs are a fraction of the cost of bank wires,
R RTP is peer to peer (P2P), but demand has and while there is no volume discount, there would be
been increasing within the gig economy. Uber drivers, for operational efficiencies for large shops. Pricing for The
example, may be paid in real time. Most merchants and Clearing House may be found here: https://bit.ly/3EgeODw.
acquirers have not considered RTP. There was neither
demand nor supply. But with the personalization of mer- Like with the card networks, a set of rules governs The
chant accounts where payfacs serve smaller merchants, Clearing House RTP transactions. There are also limits on
such as hair dressers and artists, the need (demand) and the size of individual transactions.
competitive pressure (supply) will increase.
FedNow option
Same Day ACH versus RTP
Because The Clearing House is owned by the largest
How acquirers address that need will have ramifications commercial banks, there has been, understandably,
on their risk controls and cost of funds. Today, merchants concern over the power those large institutions might
are paid via ACH. This is a batch process and although yield. Consequently, the Federal Reserve is launching
Same Day ACH is faster (and more expensive) than normal FedNow as an alternative to the Clearing House's solution.
merchant ACH funding, it is not RTP. Same Day ACH
follows the same path as standard transactions. Payments FedNow is expected to be live by 2023. Initially, FedNow
are routed through The Federal Reserve, which acts as the and The Clearing House solutions are not expected to be
Clearing House for ACH transactions; however, Same Day interoperable; however, that is the ideal state.
ACH transactions are coded differently.
The RTP alternative
Same Day ACH may be either a credit or a debit, and The card networks entered the P2P payment space with
the transaction is not authorized and consequently may Mastercard Send and Visa Direct. Both solutions reverse
be returned. Real-time payments, on the other hand, are the settlement process and allow funds to be pushed to
irrefutable, instant and allow for bilateral communication an eligible card. While the funds will be available on the
between the sender and receiver. RTP also connect the card within seconds, they may not be truly a real-time
payment with payment data in a single transaction. RTP payment, as the funds will not always be available for
introduce a new clearinghouse, protocols and capabilities, immediate withdrawal. This does not diminish their value
and, as SpiderMan's Uncle will attest, "With great power as an alternative, but they should be differentiated from
comes great responsibility." RTP.

RTP growth What's in it for acquirers
The RTP network from The Clearing House was launched Historically, acquirers have benefitted from the float as
in 2017, is a real-time payments platform that all federally follows:
insured U.S. depository institutions are eligible to
access. The Clearing House may be accessed directly • Day 0: Transaction processed
or through third-party service providers. The Clearing
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