What is a real-time payment?
A real-time payment (RTP) is a payment service that clears payments instantly regardless of the day or time. Traditional payments take up to several hours or days to clear, while an RTP service clears them immediately, even over a holiday. As a result, these real-time payment networks, also called instant payments or faster payments, create more transparency for the beneficiary and save time for consumers and businesses.
How do real-time payments work?
A real-time payment is initiated by the payer. Once initiated, the payer’s bank verifies their identity through their customer authentication measures, such as passwords, multi-factor authentication or biometrics. The bank then verifies that the funds are available through its authorization process. If the payment is approved, the bank authorizes the transaction. Next, the payment goes through the RTP system, and the transaction is processed individually, rather than in a batch.
Once processed, the payer and payee receive a notification via an SMS or push notification, for instance. Finally, the payer’s bank settles or pays out the amount to the payee’s bank and the funds are available immediately in their account.
What are the benefits of RTP?
Real-time payments are instant, and the service is available 24/7, which makes them a convenient payment method for consumers and businesses. With no delays or disruptions to payments, faster payments provide a good customer experience. Without the payment delays that regular payments are subject to, real-time payments also make it easier for businesses to manage their cash flow.
What are the risks involved with real-time payments?
Real-time payments can introduce operational and security risks for financial institutions. The immediate settlement of funds means that these payments are irreversible and a challenge for resolving fraud liability. RTP transactions also increase an FI’s exposure to authorized push payment (APP) fraud, account takeover, and phishing attacks.
Institutions must also manage compliance risk and ensure the use of real-time fraud detection tools that provide context to customers and involve them in fraud prevention. As faster payment adoption grows, these risks demand advanced fraud risk management and unified fraud prevention strategies.
What’s the difference between real-time payments and instant payments?
The terms real-time payments and instant payments are often used interchangeably. This is because they refer to the same type of payment, one that clears immediately and is irrevocable. Real-time payments are a type of instant payment that goes through a real-time payment system, like the RTP platform in the U.S., developed by The Clearing House. Similarly, the United States Federal Reserve Bank recently launched their FedNow service, another instant payments service for American banking customers.
Additional resources:
Keywords:
Real-time payment | Instant payment | Payment authentication
A real-time payment (RTP) is a payment service that clears payments instantly regardless of the day or time. Traditional payments take up to several hours or days to clear, while an RTP service clears them immediately, even over a holiday. As a result, these real-time payment networks, also called instant payments or faster payments, create more transparency for the beneficiary and save time for consumers and businesses.
How do real-time payments work?
A real-time payment is initiated by the payer. Once initiated, the payer’s bank verifies their identity through their customer authentication measures, such as passwords, multi-factor authentication or biometrics. The bank then verifies that the funds are available through its authorization process. If the payment is approved, the bank authorizes the transaction. Next, the payment goes through the RTP system, and the transaction is processed individually, rather than in a batch.
Once processed, the payer and payee receive a notification via an SMS or push notification, for instance. Finally, the payer’s bank settles or pays out the amount to the payee’s bank and the funds are available immediately in their account.
What are the benefits of RTP?
Real-time payments are instant, and the service is available 24/7, which makes them a convenient payment method for consumers and businesses. With no delays or disruptions to payments, faster payments provide a good customer experience. Without the payment delays that regular payments are subject to, real-time payments also make it easier for businesses to manage their cash flow.
What are the risks involved with real-time payments?
Real-time payments can introduce operational and security risks for financial institutions. The immediate settlement of funds means that these payments are irreversible and a challenge for resolving fraud liability. RTP transactions also increase an FI’s exposure to authorized push payment (APP) fraud, account takeover, and phishing attacks.
Institutions must also manage compliance risk and ensure the use of real-time fraud detection tools that provide context to customers and involve them in fraud prevention. As faster payment adoption grows, these risks demand advanced fraud risk management and unified fraud prevention strategies.
What’s the difference between real-time payments and instant payments?
The terms real-time payments and instant payments are often used interchangeably. This is because they refer to the same type of payment, one that clears immediately and is irrevocable. Real-time payments are a type of instant payment that goes through a real-time payment system, like the RTP platform in the U.S., developed by The Clearing House. Similarly, the United States Federal Reserve Bank recently launched their FedNow service, another instant payments service for American banking customers.
Additional resources:
- Blog: DAF and TAF: What changes merchants and issuers can expect with online payments
- Blog: FirstBank leverages Entersekt to secure Zelle® payments in real-time
- Video: Unmasking the threat of authorized push payment fraud
Keywords:
Real-time payment | Instant payment | Payment authentication
