Real-time payments: The next major treasury disruptor?

What is RTP?

RTP is one of the Faster Payments solutions developed in response to a push by the Federal Reserve to increase the efficiency of the U.S. payment system and acts as a primary way to move money. It’s a comprehensive real-time payment rail with immediate settlement using a new infrastructure intended for B2C, B2B and C2B models for companies and individuals that bank with an institution on the RTP network.

RTP provides process automation and simplification by aligning with the global ISO 20022 standard, along with two-way data-rich messaging. RTP payments can currently be used for transactions up to $1 million, initiated as standalone payments or Request for Payments (RfP).

What is RfP in RTP?

RfP is a digital way to send a request for payment and receive money back through the RTP network with immediate settlement. This functionality works well for recurring or one-time bills, subscriptions and one-time payments from vendors, partners or consumers.

With both businesses and consumers enabled, RfP simplifies the ability to move money immediately, any time of the day, any day of the year, with straight-through processing and reconciliation.

How RTP works in real-time

The Real-Time Payments (RTP) network is designed to move at the speed of the digital economy.

With Request for Payment (RfP), it’s available for immediate billing and payment, 24/7/365.

In a B2B transaction, the RfP through RTP workflow processes payments through the following steps:

The biller initiates a request for payment through their online banking application.
The biller’s bank validates that the receiver’s bank accepts RTP and routes the request for payment to the receiver’s online banking application over the RTP network.
The receiver verifies they want to pay and sends the payment back through their app.
The RTP network validates the receiver’s payment.
The RTP network sends the payment to the biller’s app.
Confirmation of the payment is provided back to the receiver’s app.

This process results in an immediate payment. For example, a food supplier could have its driver send an RfP when unloading a delivery at a restaurant. And the restaurant could pay the bill with one click that was verified immediately.

Catching up with the real speed of business

The exchange of information on the RTP network takes literally seconds to complete, rather than the usual one to two days from a standard ACH transaction or longer for other methods like checks. From a settlement standpoint, this saves both sides of the transaction time and expense compared to more traditional payment methods.

But catching up doesn’t have to do with just speed. The value means meeting customer expectations and creating efficiency in money movement. As RTP has evolved, certain scenarios have emerged when real-time really makes a difference, where businesses can:

Deliver urgent payments to customers immediately (e.g., insurance claims)
Manage recurring monthly payments efficiently (e.g., utilities, gym memberships, cell phone bills)
Send follow-up requests for NSF items (e.g., returned ACH payments)
Enable control and pay bills with precision (e.g., on due dates)

Read more: Four ways to make practical use of Real-Time Payments.

What this means for treasury professionals

U.S. Bank was one of the first banks live on the RTP network and took part in the first-ever payment. In 2019, U.S. Bank opened all routing numbers to receive and send real-time payments with messaging capabilities.

The largest opportunities are still ahead. According to The Clearing House, 70% of businesses plan to adopt RTP in the next two years. There are also developing use cases like initiating RfPs as a follow-up to rejected checks or returned ACH payments, which provides immediate value for businesses and allows different payment options to work together.

Analysts have long predicted the demise of paper checks, yet checks are still being widely used. In B2B settings, vendors sometimes can’t accept digital payment methods and in other instances payers can’t send remittance detail electronically. To successfully reduce the volume of checks used for these transactions and deliver the experience customers expect from modern businesses, RTP can be a great option.

RTP is just one part of a comprehensive payment strategy. If you need help building that strategy, we have the resources to get you started.

To learn how real-time payments are changing the way companies do business, visit our RTP® resource page, explore our survey of 1,000 American businesses, or schedule a call with a treasury management expert.