Immediate payments are not a new idea. Japan developed the first real-time system in the 1970s. More than 50 countries worldwide have enabled immediate payment services, with more in development. Central banks in various countries have already implemented changes to their settlement services to support immediate payments, reflecting the foundational role central banks play worldwide in settling financial obligations between financial institutions. Though the U.S. financial services industry is still in the early stages of developing a fully interoperable domestic immediate payments network, immediate payments are already here via The Clearing House’s RTP® network, the first new core payments infrastructure in the U.S. in more than 40 years. The RTP network was created to address the shortcomings of ACH and wire transfers. ACH takes at least one business day to move funds (although Same Day ACH can move funds on the same business day), creating risk and uncertainty for all parties in a transaction. Credit unions must withhold funds for longer to offset this risk, making money movement more expensive. Wire transfers are faster, taking anywhere from a few minutes to a few hours to complete. However, they are also more expensive per transaction.
This RTP network, which was launched in 2017, is currently accessible to financial institutions that hold 70% of U.S. demand deposit accounts (DDAs). The network now reaches 56% of U.S. DDAs. In addition, the network is open to all federally insured U.S. depository institutions. Today, TCH RTP delivers efficient real-time payments for several use cases, including (but not limited to) B2B real-time transactions, P2P real-time transactions, and payroll request for pay (RfP).
RTP increases the speed of bank transfers cost-effectively, reduces transaction risk by eliminating payment reversals and returns, and supports attaching richer context to payments.
A second major player in the world of immediate payments is the Federal Reserve. In August 2019, the Federal Reserve Board announced that the Federal Reserve banks were developing an a new instant payment rail: the FedNow® Service. In January 2021, the Federal Reserve Banks announced a pilot program for their upcoming instant payments offering, which is scheduled to be available in mid-2023.