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Waiting for payments to clear is often a luxury that small businesses and startups alike can’t afford. Real-time payments (RTP) are changing the game by allowing instant transactions around the clock. This guide explores the concept of real-time payments, explores the prominent RTP networks in the USA, explains how these payments work, and highlights their key benefits.
What are real-time payments?
Real-time payments are exactly what they sound like—payments that are processed and settled instantly. Forget waiting for days for your money to show up. With real-time payments, you send money, and it’s received and available immediately. This instant access is a significant advantage for managing your cash flow, handling urgent expenses, and keeping your business running smoothly.
Compare that to traditional outdated payment methods, and you’ll see just how much of a difference it makes. Checks can take several days to clear, and they come with the added hassle of being lost or stolen. Regular ACH transfers can drag on for 3 to 5 business days, depending on the bank’s processing schedule. Even credit card payments, while faster, can take 1 to 3 days to settle and might involve higher fees. Real-time payments cut out these delays and make sure your money’s where you need it, exactly when you need it.
What are available real-time payment networks in the USA?
In the US, two major networks are making real-time payments a reality:
FedNow Service
Created by the Federal Reserve, the FedNow Service is a new real-time payment service designed to make instant transactions between banks possible. It launched last July with just 35 financial institutions. Of the now 900 financial institutions on the FedNow real-time payments network, 78% are community banks and credit unions.
The service is a flexible, neutral platform that handles all kinds of instant payments. Basically, it lets money move from one bank account to another almost immediately, any time, any day of the year. It’s meant to be a secure and reliable system that works around the clock, making financial transactions faster and more efficient.
RTP Network
Run by The Clearing House, the RTP Network is another big player in the real-time payments space. It supports all sorts of transactions, from person-to-person to business payments, and ensures funds are transferred instantly. The RTP Network offers real-time settlement and confirmation of transactions, is available round-the-clock, and includes features like request-for-payment and detailed remittance info.
How do real-time payments work?
Here’s a quick rundown on how real-time payments go from start to finish:
Initiation: It starts with sending a payment request through your bank or payment service provider, including details like the recipient’s account and the amount you want to transfer.
Authorization: Your bank checks to make sure the transaction details are correct and that you’ve got enough funds.
Processing: Once authorized, the payment request is sent through the real-time payment network, which routes it to the recipient’s bank.
Notification and confirmation: After the payment is processed, both the payer and the payee get instant notifications. This could be via SMS, email, or a push notification from a banking app. This feature provides businesses with immediate confirmation and greater financial certainty.
Settlement: The final step in the RTP process is settlement, and it happens almost instantly. RTPs ensure the payer’s bank transfers the funds to the payee’s bank right away. The money is immediately available in the payee’s account, making everything much quicker and smoother.
What are the benefits of real-time payments?
Improved cash-flow management
With real-time payments, you get instant access to funds, which significantly improves cash flow management. For example, a small business can pay suppliers immediately upon receiving payment from customers, avoiding the lag time that often leads to cash flow issues. 82% of businesses report cash flow problems as their biggest challenge and real-time payments can help mitigate this by ensuring a steady and predictable flow of funds.
Increased efficiency and productivity
Speeding up payments and cutting down on manual processing means more time for other important tasks. Think about your finance team no longer having to spend hours reconciling payments and chasing down late ones.
24/7/365 availability
Real-time payments are available around the clock, unlike traditional methods with annoying cut-off times. Whether it’s a weekend or a holiday, you can send and receive payments whenever you need. This is perfect for businesses like e-commerce stores that want to process payments and ship orders outside of regular banking hours, keeping operations smooth and customers happy.
Transaction certainty
With real-time payments, you get immediate confirmation that the money has gone through, so there’s no guessing game. This is super helpful for businesses that need to make sure they’ve received funds before shipping products or providing services. For example, a freelance consultant can start a project with confidence, knowing they’ve been paid.
Cost-effective solutions
Platforms like Forwardly make real-time payments not only faster but also cheaper. Instead of shelling out for wire transfers or credit card fees, you can use Forwardly to send bill payments instantly at no cost. Receiving instant payments with Forwardly only costs 1%, capped at $10. Plus, there are no subscription fees. Forwardly uses FedNow and RTP networks to facilitate these transactions, ensuring speed and security without the extra costs.
Ready to transform your business with real-time payments?
Switching to real-time payments can really change the game for your business, making cash flow management and financial operations smoother and more efficient. With Forwardly, this shift is super easy and affordable.
Experience the speed and efficiency of instant transactions with Forwardly. Say goodbye to waiting for payments to clear and hello to improved cash flow management. Sign up with Forwardly today for free and take control of your financial operations with real-time payments. Get started now!
