Real-Time PaymentsHow Do RTPs Work? Where are They Available & What Does the Future Hold?

Real-Time Payments (RTPs): Why Do They Matter for eCommerce?

Gone are the days when merchants had to wait days for transactions to clear. Real-time payments (RTPs) are changing the waiting game, offering instant and secure payment processing.

But, what does this mean for eCommerce businesses, especially those in high-risk industries? How do RTPs compare to traditional payment methods like ACH? And most importantly, how can merchants leverage RTPs to improve cash flow, reduce fraud, and enhance customer satisfaction?

Let’s break it all down.

What Are Real-Time Payments?

Real-Time Payments

[noun]/rēəl • tīm • pā • mənts/

Real-time payments (RTPs) are financial transactions that are processed instantly, providing immediate transfer of funds between parties. These payments are executed securely and efficiently, eliminating the delays of traditional payment methods.

Real-time payments are transactions that clear and settle instantly. This process can be done 24/7, eliminating the delays associated with traditional banking processes.

Unlike conventional payment methods that require batching or waiting periods, RTPs provide immediate access to funds. For eCommerce businesses, this means faster cash flow, reduced payment disputes, and an overall smoother customer experience.

For merchants operating in high-risk industries like CBD, nutraceuticals, and adult products, speed and security in transactions are crucial. RTPs offer a way to reduce exposure to fraud for businesses that are in highly regulated industries who were often subject to chargebacks and fraudulent payments. 

How Do Real-Time Payments Work?

When a payment is initiated, the funds are immediately transferred from the payer's bank account to the recipient's account. The payment bypasses a lot of the delays associated with traditional payment methods like ACH transfers or checks.

All parties involved can trust the accuracy and speed of the transaction because advanced technology and secure communication protocols facilitate the payment. And, both the sender and receiver are notified in real-time, providing extra transparency.

Real-Time Payments vs. Conventional ACH Payments: A Breakdown

While ACH payments have been a staple for businesses, they come with inherent delays and risks:

Merchants stand to gain several advantages from adopting real-time payments:

• 24/7 Availability: Real-time payments can be made and received any time, including weekends and holidays. This flexibility and can help with urgent or time-sensitive transactions.
• Faster Access to Funds: Eliminating wait times allows businesses to reinvest in inventory, marketing, and growth strategies more quickly.
• Reduced Chargebacks: Since RTP transactions are instant and final, the risk of fraudulent disputes is significantly lower compared to traditional payment methods.
• Enhanced Security: Real-time verification and processing reduce exposure to common fraud tactics, ensuring merchants are protected.
• Better Customer Experience: Instant payments mean fewer delays in order fulfillment, leading to increased customer satisfaction and loyalty.

Payment Method	Speed (Settlement Time)
Real-Time Payments (RTP)	Instantaneous, 24/7
ACH (Automated Clearing House)	1-3 business days (Same-day ACH available)
Wire Transfers	Same-day (domestic), 1-5 days (international)
Credit Card Settlements	Varies, can be 1-3 days

Where Are RTPs Available Today?

Real-time payments are rapidly expanding across the globe.

In the United States, The Clearing House's RTP Network and the Federal Reserve’s FedNow initiative are leading the charge in making instant payments more accessible. Several banks and financial institutions are integrating RTP capabilities, with adoption expected to rise in the coming years.

Internationally, countries like the UK, India, and Australia have already embraced RTPs, demonstrating their effectiveness in streamlining financial transactions. The EU has the Single Euro Payments Area (SEPA), for example, while other countries and regions have their own individual RTP networks.

As more regulatory frameworks develop, businesses worldwide will have increased access to these high-speed payment solutions.

The Future of RTPs: What’s Coming Next?

There are already numerous use cases for real-time payments. Some examples include:

Use Cases for Real-Time Payments

• Person-to-Person (P2P) Transfers: Quickly send money to friends or family members, whether splitting a bill or providing financial assistance.
• Merchant Payments: Enable instant payments for goods and services at retail or online stores.
• Bill Payments: Pay utility bills or other recurring expenses instantly to avoid late fees.
• Payroll Disbursements: Employers can use RTP to pay employees immediately, providing faster access to earned wages.
• Insurance Claims: Expedite claim payouts directly to policyholders for faster resolution.
• eCommerce Refunds: Provide customers with immediate refunds for canceled orders or returns.
• Loan Disbursements: Facilitate quick access to approved loan funds for borrowers.
• Emergency Payments: Support urgent financial needs in cases like medical emergencies or disaster relief.

But, the next decade will see an even greater push toward RTP adoption. Key trends to watch include:

• Broader Bank & Fintech Adoption: More financial institutions will integrate RTP capabilities into their services.
• Growth in High-Risk Industries: Sectors like cannabis, supplements, and adult products will particularly benefit from secure, instant transactions.
• Integration with Emerging Technologies: Artificial intelligence and blockchain will further enhance RTP security and fraud prevention.

As infrastructure improves and regulatory barriers ease, RTPs will become the standard for online payments, shaping the future of eCommerce transactions.

Fraud Detection in the RTP Era: Challenges & Opportunities

With the rise of real-time payments, fraud detection must evolve. Because RTPs are instant and irrevocable, businesses must adopt more advanced fraud prevention strategies.

Unlike credit or debit card transactions, which allow consumers to file disputes through their issuing bank, non-card payment methods operate on systems where the transaction is considered final once authorized and processed. This lack of chargeback capability stems from the underlying payment infrastructure. RTPs are designed to prioritize speed and direct control over funds rather than providing a mechanism for reversing payments post-completion.

But, while RTPs remove the risk of chargebacks, they require merchants to be proactive in securing transactions against fraudsters exploiting instant processing speeds.

RTPs: The Way Forward for the Payments Industry?

Whether you're looking to enhance payment processing speed or fortify your business against fraud, real-time payments offer a transformative solution.

Being prepared to adapt to real-time payment solutions is not just an advantage; it's a necessity for a fast-paced, digital economy. By leveraging these innovative solutions, merchants can not only enhance their transaction processes but also build trust with their customers and stay ahead in competitive markets.