In today’s payments world, one topic continues to be top of mind for both bankers and practitioners- speed. Enter Real Time Payments (RTP), the latest form of payment that aims to provide the quickest receipt option between businesses and consumers.
What is RTP?
The Clearing House (TCH) – a banking association and payments network owned by 25 US banks – launched RTP in November 2017. This financial transaction system was launched to enable businesses, consumers and governments to send funds 24 hours a week – 7 days a week – 365 days a year. Transactions are currently limited to a maximum of $25,000 but this amount may increase in the future. RTP is a credit push system (no debits are allowed) that ensures the certainty of funds and reduces the risk of potential fraud associated with ACH debits. The goal is that the funds are available to the recipient within seconds, increasing its appeal for certain situations. The benefits of RTP are the immediate availability to the recipient and instant confirmation that the sender receives once the payment is sent.
Currently, only certain financial institutions in the US provide RTP service. However, The Clearing House is targeting for every financial institution, including credit unions, to be able to support RTP by 2020. RTP is capable of supporting B2B, B2C, C2B, and P2P payments and is an ideal fit in scenarios where payment is needed immediately. Based on previous engagements, Redbridge sees RTP being a game-changer for emergency payroll issuances, insurance, and utility payments; while routine payroll, A/P payments, and vendor payments may continue to be processed in a standard ACH format and delivery time. In a recent meeting with an insurance provider, the company mentioned that they were considering (RTP) as an option to get claim reimbursements completed quicker. In another engagement involving the utilities industry, sending quicker rebate payments to customers was a task the company was looking to optimize. RTP is an ideal fit for these types of scenarios.
Benefits of RTP
Along with the overly quick delivery of the payment, an additional benefit companies will see from RTP is knowing exactly when their funds will move, eliminating float times for both the sender and the receiver. The service will also allow some users to take advantage of early payment discounts. Another benefit of the service is that it provides an additional method to send payments electronically, which continues to be a hot topic as organizations continue exploring options that allow them to reduce paper checks.
From a messaging perspective, the RTP network allows for higher levels of remittance data than ACH to be transmitted. The Clearing House employs ISO 20022 for the RTP program, which allows for international standardization and a higher volume of data, as well as increased flexibility for banks to best meet customer demands. Specifically, RTP systems utilizing ISO 20022 will have the capacity to provide messaging that includes more detailed remittance information, real-time status messages, and requests for payments, thereby improving the customer experience.
Certain fees will be charged for transfers sent, requests for payments, and remittance advice. However, in an effort to level the playing field for financial institutions, no monthly minimums on fees are currently projected. Connectivity and RSA token pass-through fees may also apply.
Whether you are looking for faster payment methods or a backup option to have on standby, Redbridge’s team of global experts can assist in collecting information from banks to compare their capabilities on Real Time Payments service, among others. Speak to a Redbridge advisor today to help you determine the method of payment that best suits your company.