At Alacriti, we understand the importance of staying ahead in the world of payments. As a part of our effort to stay at the forefront of technology, Alacriti has been in partnership with The Clearing House (TCH) to help foster real-time payment adoption for financial institutions since October 2020.
As a leading fintech provider, we are committed to helping financial institutions navigate the complexities of the RTP® network and unlock its full potential. Alacriti facilitates a connection between financial institutions and the RTP network (as well as other rails) through its Orbipay Payments Hub solution. The below frequently asked questions about the RTP network should help address many of the common questions that financial institution executives have about the network.
What is the RTP network?
The RTP network, developed by The Clearing House, is the first new payments infrastructure built in the U.S. in 50 years and empowers financial institutions and businesses to implement innovative, value-added use cases for faster payments. The RTP network gives the banking industry a modern platform for 24/7 domestic real-time payments, which include rich data capabilities and immediate payment confirmation. The network enables instantaneous settlement and availability, so funds can be used or withdrawn as cash within seconds. TCH is owned by 24 of the largest banks in the U.S.
What’s the difference between the RTP network and the FedNow® Service?
RTP Network: Initiated in November 2017, the RTP network is overseen by The Clearing House. It operates as a privately held system and is owned by the largest commercial banks such as Bank of America, TD Bank, BNY Mellon, and many more. More than 280 participants currently use the RTP network to send and receive real-time payments, and nearly 655 are on the network, with a 68% reach across the account base. Notably, users can both initiate and request payments through the platform. The RTP network surpassed the 1 billion payment milestone in a single day, demonstrating consistent growth since its initial launch. The RTP network is getting close to averaging 1 million payments per day via RTP, exceeding 1 billion every Friday. The RTP network has recently introduced several innovative features, garnering positive feedback from individuals and financial institutions. Among these features is IXB (Immediate Cross-Border Payments), as well as a Zelle partnership (a P2P service), which has established partnerships with numerous banks and financial institutions. As for limits for transactions, there is a maximum volume limit of $1,000,000 per transaction. This rapidly increased from the initial $25,000 individual value limit as The Clearing House wanted a more risk-managed approach when introducing this service.
FedNow Service: Launched in July 2023, the FedNow® Service is under the management of the Federal Reserve, a centrally-owned system established in 1913. Some notable financial institutions that take part in the FedNow Service are JPMorgan Chase, Veridian Credit Union, and many more. As of February 2024, more than 655 financial institutions use the FedNow Service, with a 68% reach across the account base… Similar to the RTP network, this instant payments service operates continuously, providing services every day of the year without limitations on weekends or holidays. While both platforms ensure availability for sending and receiving payments at all times, the RTP network currently imposes a maximum volume limit of $1,000,000 for transactions, as stated above. The FedNow Service has a limit of $500,000. As for cycle day, the RTP network will be 12 a.m. to 11:59 p.m. ET. For the FedNow Service, it will be 7 a.m. to 7 p.m. ET. The FedNow Service will offer everything the RTP network does in addition to Liquidity Management Transfer (LMT). The cost to send a singular customer payment is $0.045 for both, but the cost to send a request for payment (RfP) is $0.01 for the FedNow Service and $0.11 for the RTP network.
What’s the difference between the RTP network and PayPal/Zelle/Venmo?
PayPal operates as a private money transfer service, distinguishing itself from the RTP network. In contrast to platforms such as PayPal, Zelle, and Venmo, users of the RTP network are required to go through their financial institution for access. PayPal, Zelle, and Venmo users can manage their accounts and send, request-to-receive, and receive money directly from the app. The RTP network offers real-time money movement by enabling users to send and receive money within seconds. Services such as Venmo impose a fixed rate of 1.75% on instant transfers sent to a credit union or bank account. For example, if someone is transferring $200 to their bank account, they incur a $3.50 fee, while a $50 transfer results in a $0.87 fee. Users may opt for a free transfer option, however, they are required to wait 1-3 business days. On the RTP network, senders incur a $0.045 per credit transfer fee (including returns). Alternatively, a $0.01 fee is charged for the RfP (Request for Payment), which must be paid by the requesters.
Who is on the RTP network?
Over 655 financial institutions, 16 funding agents, and 22 technology providers are participating on the RTP network.
What are the latest features on the RTP network?
The Clearing House aims to not only offer faster payments but safer and more secure payments. They recently launched a new tokenization capability that allows the replacement of actual account information with a randomly generated token or tokenized number, which provides more control and the ability to limit certain functionality. The Clearing House is already seeing an interest in this.
To support RfP, The Clearing House launched Document Exchange, which is the ability for a merchant to take an actual image of the bill and upload it to the cloud-based service, which then creates a link that can be embedded in the Request for Payment. The consumer receives the Request for Payment and just clicks on a link to open the bill. This functionality has the opportunity to create new products driven by B2B as
well as consumer bill pay. The volume of RFP-driven payments continues to grow, with 80,000 transactions completed last month. Currently, our coverage spans 20% of the account base, primarily focusing on A2A and bill payment use cases.
What are the use cases for the RTP network?
The RTP network is a versatile platform that supports a wide range of use cases, primarily driven by technology companies, banks, and fintech collaborations. It is not just a product but a network that facilitates various products and services. One of the significant use cases of RTP is in the payroll sector, where it enables services like earned wage access, regular payroll cycles, and same-day payroll. This is particularly beneficial for industries like restaurants and transportation, where immediate access to funds is crucial for operations and employee satisfaction. The network’s ability to handle real-time transactions makes it popular for payroll-related services, with the highest volume of transactions occurring on Fridays, especially for adjustment payrolls and same-day services.
Apart from payroll, the RTP network is also extensively used for merchant transactions, allowing businesses to move money from their merchant accounts to bank accounts 24/7, which is particularly useful for small business owners who need to pay bills and suppliers over the weekend. The network supports business-to-business (B2B) transactions, enabling treasurers to make precise, timely payments while maximizing interest earnings. Additionally, the RTP network is expanding into new areas like home closings, providing services outside traditional banking hours. Despite the growth of the RTP network, it does not seem to be taking away from other networks like wire or ACH but is rather complementing them by offering new capabilities and use cases.
Read more on the use cases for the following groups:
How can RTP be monetized?
How can I connect to the RTP network?
Financial institutions can integrate into the RTP network directly or through third-party service providers (such as a core processor, a hosted gateway, a bankers’ bank, or a corporate credit union), or they can self-fund or use a funding agent.
Is it mandatory to have a funding agent?
Financial institutions should consider before connecting to real-time payments whether or not they want to leverage a funding agent. Funding agent services are provided as a liquidity management tool. FIs have to decide if they need a funding agent—it’s not mandatory. For instance, if an FI is on the RTP network and has a sub-account as it sends transactions, the amount in the account goes down as it receives them, so the balance has to be managed. There needs to be enough money over the weekend because the account can’t be funded without using a Fed wire, and the Fed is closed over the weekend. This creates a vulnerability. A funding agent ensures that an FI has funding 24/7/365.
What is the process for a RTP network payment?
The following chart shows the process of an RTP network payment:
Webinar: Realizing the Value of Real-Time Payments for Credit Unions
How much does the RTP network charge per transaction?
The RTP participant fees are as follows:
What is the RTP network’s transaction limit?
The credit transfer limit on the RTP network is currently $1 million.
Are RTP and FedNow interoperable?
The RTP network and the FedNow Service are not interoperable, although they are both ISO 20022-based. Each platform has a distinct arrangement for sending and receiving payments. These services can only be used by financial institutions to transmit to other financial institutions that utilize the FedNow service or the RTP network; they cannot be used between financial institutions that do not share a service provider. For instance, if a bank is only connected to the RTP network, it cannot originate an instant payment to a credit union that is only connected to the FedNow Service.
Which instant payment network should I start with first, FedNow or RTP?
Embracing both networks is a sound strategy as the two networks are not interoperable. This approach allows financial institutions to benefit from the unique features of each network and provide their accountholders with more flexibility in their payment options. It also saves the time and resources that have to be repeated when adding the second network later.
What resources has The Clearing House provided to learn more?
On its website, The Clearing House provides numerous resources, including videos and demos and a document library.
