As Real Time Payments is becoming more widely available, some may be wondering how RTP is different than other payments offerings such as Same-Day ACH and the forthcoming FedNow. Here are key similarities and differences:  

Same Day ACH 

First, RTP and Same Day ACH are payment rails offered by two different networks. RTP is the payment rail connected to The Clearing House. The Clearing House is a banking association and payments company owned by a network of commercial banks. The Clearing House is responsible for this core payments infrastructure in the US. Similarly named is The Automated Clearing House (ACH) network, which offers the Same-Day ACH payment rail. The ACH network is an electric funds transfer system governed by Nacha, the National Automated Clearing House Association. Although offered by different networks, both RTP and Same-Day ACH offer transaction processing on the day the transaction was initiated.  

The similarities between RTP and Same Day ACH end there. With Same-Day ACH, the payments are batched, settled, and cleared. This is a process that requires communication between Bank A, Bank B, and the Federal Reserve Bank, and it occurs over several hours.  

On the other hand, Real Time Payments occur just as stated, in real time. RTP transactions settle as they occur rather than in batches. This means RTP payments are final as soon as they occur. RTP enables end users to send payments directly from their bank accounts instantly 24/7, regardless of bank holidays or hours.  Another difference is that the ACH payment rail allows for both credits and debits. These debits are how an end user might set up a monthly payment for their cable bill. The RTP network only allows for a credit push as this ensures the person sending funds is aware of each transaction; the restriction thus reduces the risk of certain types of fraud.  

FedNow

Turning to FedNow, there are many more similarities as FedNow will also provide instant payments through the user’s financial institution. The capability to push payments instantly 24/7 is the same instantaneous, direct transaction as RTP. FedNow and RTP have a key difference which is the network on which they operate. FedNow is a payment rail available through the Federal Reserve’s FedLine network. As stated earlier, RTP is a payment rail available through The Clearing House. 

Another difference is that The Clearing House is celebrating its 5^th year of RTP capabilities. On the other hand, FedNow came online in 2023. 

When it comes to real time payment processing, don’t think of it as utilizing one vs. the other. As more real time, instant payment rails become available, the combination of multiple rails creates a robust and modern offering that fintech’s can offer to their user base. This modernization allows for quicker, more secure payments for businesses and end users everywhere.