At Orum, we're propelling financial tech-forward, much like the evolution of consumer gadgets from clunky PCs to sleek smartphones. Just as these advances streamline our daily lives, RTP transforms payments by offering instant processing, 24/7 availability, and immediate settlement—all with minimal Personal Identifiable Information (PII) required.
In this analogy, the real-time payment system is like the modern smartphone of payment rails, while push payments resemble the outdated PC tower.
What are Push Payments?
Push payments are a type of electronic bank transfer where the payer initiates the transaction, instructing their bank to send money to a recipient's account. This stands in contrast to pull payments, where the payee initiates the transaction, instructing their bank to withdraw funds from a payer's account.
Common examples of push payments include:
- Sending money to a friend or family member through a bank app
- Paying a bill online
- Making a purchase with a debit card
Push payments are typically faster and more convenient than pull payments, as they do not require the payee to provide any account information to the payer. However, push payments can also be more risky, as the payer has no control over where the money is sent once it has been transferred.
What is RTP?
Real time payments (a.k.a RTP or The RTP Network) were introduced by The Clearing House in 2017. RTP was the first instant payment architecture introduced in the U.S.
The network radically modernized payments overnight. RTP processes domestic payments 24/7/365 with no interruptions (even on weekends and bank holidays), with immediate settlement and instant availability of funds.
That’s a huge difference from other rails like ACH and push payments, in which payments are cleared in batches and they settle only after the payments clear—plus, those rails operate only during standard banking hours.
Beyond the benefit of an instant experience for your customers, who can access their funds within seconds, other advantages of using RTP include a fixed cost per transaction, the ability to send data like invoice information along with the payment, and the flexibility in requiring minimal Personal Identifiable Information (PII).
How does the real-time payment system work?
To use RTP, customers need to have an account at a bank or other financial institution that’s part of the RTP network. Financial institutions have to opt in to do that, but most customers have access: The Clearing House estimates that RTP is accessible to institutions that hold about 90% of U.S. demand deposit accounts (DDAs).
When accessing RTP through solutions like Orum’s simple API, the process is seamless and super-fast for customers. The sender of the payment initiates the transaction (as a credit push), and the RTP network processes each payment individually, in real time—no batching and waiting for clearance.
To facilitate that instant processing and settlement, the RTP network requires participating funding institutions to hold a separate, pooled account for liquidity purposes at The Clearing House. That way, interbank settlement happens immediately, even before the receiving bank confirms the details of the recipient’s account.
The receiver of the funds gets access to them within seconds. Additionally, the RTP network sends both the sender and receiver of a transaction a payment status update instantly to confirm success and the amount paid.
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How RTP outperforms push payments (P2C)
Compare RTP to push payments, and it’s clear why RTP will be the preferred, fastest, and safest way to move money going forward—and why P2C is on the way out.
Speed and cash flow control
Because RTP payments are processed and settled instantly, you receive access to your funds within seconds. Payments are also processed at any time, 24/7/365.
By contrast, push payments are not settled instantly. Just like with ACH, paper checks, and wires, the card rail system batches many payments together to clear and settle them at a later time. Plus, these settlements happen only during regular banking days and business hours. All of that adds up to delayed access to funds.
That delay isn’t ideal for the receiver of the funds, or for managing cash flow. With RTP a business can receive money from customers on the weekends, at night, and even on banking holidays—giving you a far greater understanding of cash flow and more control over your finances.
Cost
Compared to push payments, RTP is a significantly more cost-effective way to send and receive instant payments.
RTP through Orum is a simple flat fee per transaction, while card rail vendors use a more complicated pricing structure by charging basis points. RTP is near-instant by nature; card rails can deliver that experience, but only at a significant cost. For example, companies that use card rails may lose up to $30,000 in fees for every $1 million they make in sales.
It’s clear: If you supplemented even a small portion of your instant transactions with RTP each year, you’d increase your margin and reduce costs.
Security
When a company uses card rails, often its customers must provide sensitive information like their Social Security number or Taxpayer Identification Number. Many individuals and businesses are reluctant to share this PII, especially online.
That’s not always necessary with Orum’s RTP solution — allowing you to remove friction from the onboarding process and create a better user experience.
With Orum, customers often need only to provide their first and last name (or if you’re a business, just the company’s legal name). Even better: You’re not sacrificing any security or reliability. RTP adheres to Know Your Customer rules to ensure the security of transactions are secure.
By contrast, with card rails, you’ll have to implement a payment card industry (PCI) compliance program. This mandatory step adds cost, complexity, and significant time to the process.
Additional data capacity
What additional information can you send along with the payment for each of these rails?
For card rails, that’s a short, simplistic answer. Transactions contain only the most basic, necessary information: the payment amount and who’s receiving it.
RTP offers far more. The network uses the data-rich ISO 20022 messaging standard for payments, which unlocks the ability to include additional information: details about a payment’s source and purpose to make reconciling invoices much easier, the reason a payment was denied, and more.
Additionally, RTP automatically sends confirmation messages to both the sending and receiving parties once the transaction is complete. That’s not possible with card rails.
Orum provides an easy-to-implement solution for our customers to quickly access instant payouts through a number of major payment rails including FedNow, ACH, Same-Day ACH, and Wires.
But as you can see, we’re particularly passionate about RTP and all the benefits it offers. We’re not the only ones.
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The growth of RTP in finance
RTP has seen explosive growth since its launch in 2017, with transaction volume increasing by double digits quarter-over-quarter for 16 straight quarters. This surge is driven by consumer demand for faster payments, as evidenced by a Federal Reserve survey showing nearly 80% of consumers are interested in quicker payment options. Additionally, the rise of the gig economy, where workers value immediate access to wages, is fueling RTP adoption. A McKinsey survey found that over a third of employed workers identify as independent contractors, and a separate study showed that 70% of gig workers prefer platforms offering near-instant pay.
What’s next for the real-time payment system?
Because of the confluence of trends we’ve discussed and the advancement of payment technology, real-time payments are growing in popularity across the globe. According to FICO’s April 2023 survey of consumers in 14 countries, 90% of respondents have sent a real-time payment. At least 95% of consumers have used real-time payments in India, Indonesia, the Philippines, and Brazil.
Services will only continue to improve. In the case of the RTP Network specifically, since launching it in late 2017 The Clearing House has added several features to make the network even better. A few of the more recent updates include:
- Expanded Request for Payment capability: RfP now allows customers (like a biller) to request a payment from other users.
- Document Exchange: Access documents like bills, invoices, and remittances in the same transaction flow with the payment or RfP. Both PDF and XML documents are supported.
- Tokenization: RTP account security was enhanced with tokens that protect sensitive deposit and checking account credentials used to request or make payments, reducing the likelihood of theft and fraud.
- Higher transaction limit: The Clearing House raised the RTP per-transaction limit to $1 million, making it easier to use for higher-value case cases like real estate closings, commercial loans, merchant settlements, and corporate supplier payments.
The Clearing House plans to continue rolling out new features and expanded technical access as the RTP Network matures.
FedNow: Another instant payment option
Real-time payments recently got more interesting with the launch of FedNow in July 2023. Like RTP, FedNow is an instant payment platform offering 24/7 processing, guaranteed settlements, and transaction confirmations for both senders and receivers.
However, there are a couple of key differences between the two. First, FedNow has a lower default transaction limit of $100,000 compared to RTP's $1 million cap. Second, FedNow is backed by the Federal Reserve, which means it's expected to be more accessible to smaller banks and credit unions across the country. This wider reach could accelerate the adoption of real-time payments in the U.S.
See How FedNow Can Work for Your Business
Orum’s Real-time Payment Processing Solutions
Orum.io streamlines money transfers with access to major payment rails like FedNow, RTP, Same Day ACH, ACH, Wires, and instant bank account verification. Real-time payments are replacing traditional card rails, meeting the instant transaction needs of today's digital-driven economy, especially for gig workers and younger generations. Our API integration optimizes transaction speed and efficiency based on factors like size, timing, and credentials. Get set up in two weeks without complex bank integrations or lengthy compliance.
Are you interested in instant, accurate payment processing? Get in touch to learn more about Orum’s real-time payment solutions.