What is a Real-Time Payment?
Instant payments that settle in seconds, available 24/7/365—the future of business payments is here.
Quick Definition
A real-time payment (RTP) is an instant payment system that settles funds within seconds, available 24/7/365. Unlike traditional payment methods that batch process during business hours, RTP provides immediate, irrevocable fund transfers any time of day.
- Settlement in seconds, not days
- Available 24/7/365, including holidays
- Immediate confirmation and irrevocable settlement
Understanding Real-Time Payments
Real-time payments represent a fundamental shift in how money moves between accounts. While traditional payment methods like ACH can take days to settle and wire transfers require banks to be open, real-time payments settle in seconds—any time, any day.
In the United States, two primary real-time payment networks operate: The Clearing House RTP network (launched 2017) and the Federal Reserve's FedNow Service (launched July 2023). Both enable instant, irrevocable payments between participating financial institutions.
Real-time payments are transforming business payments for:
- Urgent vendor payments — Pay suppliers instantly when needed, even outside business hours
- Just-in-time payments — Optimize cash flow by paying at the last moment with instant settlement
- Emergency disbursements — Handle urgent payroll, insurance claims, or refunds immediately
- Weekend and holiday payments — No more waiting for banks to open
US Real-Time Payment Networks
RTP Network (TCH)
The Clearing House's real-time payment network:
- - Launched November 2017
- - Up to $1 million per transaction
- - Owned by major US banks
- - 65%+ of US demand deposit accounts
FedNow Service
Federal Reserve's instant payment service:
- - Launched July 2023
- - Up to $1 million per transaction
- - Operated by Federal Reserve
- - Growing bank adoption
How Real-Time Payments Work
Instant Processing
Unlike batch-processed payments, each RTP transaction is processed individually in real-time:
- 1.Sender initiates payment through their bank
- 2.Bank validates and sends to RTP/FedNow network
- 3.Network validates and routes to receiving bank
- 4.Funds credited within seconds, confirmation sent
24/7/365 Availability
Real-time payment networks never close:
- -Process payments at 2 AM on a Sunday
- -Settle transactions on Christmas Day
- -No cutoff times or banking hours
- -Immediate confirmation any time
Real-Time Payment vs Other Methods
| Factor | RTP/FedNow | Wire Transfer | ACH |
|---|---|---|---|
| Speed | Seconds | Same day (hours) | 1-3 business days |
| Availability | 24/7/365 | Business hours | Business days |
| Max Amount | $1 million | No limit | $1 million (Same-Day) |
| Cost | $0.50-$2 | $15-50 | $0-3 |
| Reversibility | Irrevocable | Irrevocable | Can be reversed |
Benefits for AP Teams
Settlement time vs days with ACH
Availability including weekends
Confirmation and receipt
Real-time payments give AP teams unprecedented control over cash flow. Pay vendors at the optimal moment, capture early payment discounts at the last second, and never miss a payment deadline due to banking hours or holidays.
Important Considerations
While real-time payments offer significant advantages, there are key factors to consider:
- !Irrevocable transactions — Once sent, RTP payments cannot be recalled. Verify all details before sending.
- !Bank adoption varies — Not all banks support RTP/FedNow yet. Confirm your bank and recipient's bank participate.
- !Transaction limits — Current $1M limit may not suit all business needs. Use wires for larger amounts.
- !Fraud prevention critical — Speed means less time to catch errors. Strong verification controls are essential.
When to Use Real-Time Payments
Urgent Vendor Payments
Pay a critical supplier instantly when standard payment timing won't work—even at midnight or on weekends.
Just-in-Time Cash Management
Maximize cash on hand by paying at the last possible moment, knowing funds will arrive instantly.
Early Payment Discounts
Capture 2/10 net 30 discounts at the deadline with instant settlement, even if day 10 falls on a weekend.
Emergency Disbursements
Handle insurance claims, employee emergencies, or urgent refunds immediately, any time of day.
Gig Economy & Contractor Pay
Offer instant payment to contractors and gig workers as a competitive advantage.
Real-Time Payment Best Practices
Verify Before Sending
Double-check account details since RTP is irrevocable. Use verification callbacks for new payees or changed bank info.
Use Strategically
Reserve RTP for urgent or time-sensitive payments. ACH remains cost-effective for routine, planned payments.
Leverage 24/7 Availability
Take advantage of always-on capability for weekend payments, holiday deadlines, and after-hours emergencies.
Maintain Strong Controls
Implement approval workflows and payment limits. Speed makes fraud harder to catch—prevention is key.
Track and Analyze
Monitor RTP usage and costs. Compare total cost of ownership against wire and ACH alternatives.
Real-Time Payments Globally
United Kingdom
Faster Payments Service (FPS) launched in 2008, processing billions of transactions annually with near-instant settlement.
European Union
SEPA Instant Credit Transfer enables euro payments across 36 countries in under 10 seconds, 24/7/365.
India
UPI (Unified Payments Interface) processes over 10 billion transactions monthly, making India a global leader in instant payments.