Real-Time Payment Rails
Last Updated: 2025-12-24 Status: Complete
Quick Reference
RTP Network (The Clearing House):
- Volume: 343M payments in 2024 (+38% YoY), $246B value (+94% YoY)
- Participating FIs: 1,000+ institutions (67% growth in 2024)
- Transaction Limit: $1M (increasing to $10M on Feb 9, 2025)
- Settlement: Instant (<20 seconds), 24/7/365
- Daily Volume: 1M+ transactions/day
FedNow Service (Federal Reserve):
- Launch: July 2023
- Participating FIs: 1,500+ institutions (all 50 states)
- Growth: 645% YoY (Q3 2024 to Q3 2025)
- Transaction Limit: $10M (effective Nov 12, 2025)
- Settlement: Instant (<20 seconds), 24/7/365
Wire Transfers:
- CHIPS: ~500K daily payments, $1.8T daily value, 42 members
- Fedwire: 9,000+ connected FIs, real-time gross settlement
- Cost: $10-$30 per transaction
The Instant Settlement Revolution
Real-time payment rails represent the biggest shift in payment infrastructure since ACH launched in the 1970s. By 2027, instant payments are projected to account for 25-30% of all electronic payments in the US.
What Are Real-Time Payments?
Real-time payments (RTP) are electronic fund transfers that settle instantly (within seconds) and are available to the receiver immediately, 24/7/365, including weekends and holidays.
Key Characteristics
┌─────────────────────────────────────────────────────────────────────────────┐
│ REAL-TIME PAYMENT CHARACTERISTICS │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ 1. INSTANT SETTLEMENT │
│ • Funds move in <20 seconds (not T+1/T+2) │
│ • Irrevocable once settled │
│ • No batch processing delays │
│ │
│ 2. 24/7/365 AVAILABILITY │
│ • No "business days only" restriction │
│ • Works nights, weekends, holidays │
│ • No cutoff times like ACH │
│ │
│ 3. RICH DATA / MESSAGING │
│ • ISO 20022 message format (modern XML-based) │
│ • Remittance information (invoice numbers, descriptions) │
│ • Up to 140 characters of payment information │
│ • Structured data for reconciliation │
│ │
│ 4. REQUEST FOR PAYMENT (RfP) │
│ • Payee can send payment request to payer │
│ • Payer approves/declines │
│ • Alternative to debit/pull transactions │
│ │
│ 5. CONFIRMATION OF PAYEE │
│ • Verify receiver account before sending │
│ • Reduce misdirected payments │
│ • Name-matching validation │
│ │
│ 6. IRREVOCABLE │
│ • No returns/chargebacks once settled │
│ • Much lower dispute risk vs ACH/cards │
│ • Final settlement = true payment finality │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
RTP vs FedNow vs ACH vs Wires
┌─────────────────────────────────────────────────────────────────────────────┐
│ PAYMENT RAIL COMPARISON (2024-2025) │
├──────────────┬────────┬────────┬───────────┬─────────┬ ────────────────────────┤
│ Attribute │ RTP │ FedNow │ ACH │ Wires │ Cards │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Settlement │Instant │Instant │ T+1 to T+3│Same-day │ T+1 to T+2 │
│ │(<20s) │(<20s) │(Same-Day: │ (RTGS) │ │
│ │ │ │ 3 windows)│ │ │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Availability │24/7/365│24/7/365│Business │Business │ 24/7 (auth) │
│ │ │ │days + Same│ hours │ Settlement: business │
│ │ │ │-Day │ │ days │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Direction │ Push │ Push │ Both │ Push │ Pull │
│ │ │ +RfP │ │ │ │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Max Amount │ $10M │ $10M │ $1M │Unlimited│ Varies ($25K-$100K │
│ (2025) │(Feb 9) │(Nov 12)│(Same-Day) │ │ typical) │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Cost per │$0.50- │$0.50- │ $0.20- │ $10-$30 │ $2.00-$3.50 │
│ $100 │$1.00 │$1.00 │ $1.50 │ │ │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Returns/ │ None │ None │ Yes │ Very │ Yes (chargebacks) │
│ Disputes │(irrevo-│(irrevo-│(60 days) │ rare │ (120-180 days) │
│ │cable) │cable) │ │ │ │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Participating│1,000+ │1,500+ │11,000+ │9,000+ │ Universal │
│ FIs │ │ │ │ │ (merchant acceptance) │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Message │ISO │ISO │ NACHA │Fedwire/ │ ISO 8583 │
│ Format │20022 │20022 │ format │SWIFT │ │
├──────────────┼────────┼────────┼───────────┼─────────┼────────────────────────┤
│ Best Use │Instant │Instant │Recurring, │Large B2B│ Consumer POS, │
│ Cases │payouts,│payouts,│B2B, │Real │ e-commerce, │
│ │gig │urgent │subscrip- │estate, │ international │
│ │economy │payments│tions │securit. │ │
└──────────────┴────────┴────────┴───────────┴─────────┴────────────────────────┘
RTP Network (The Clearing House)
The RTP network, operated by The Clearing House, launched in November 2017 as the first real-time payment rail in the US.
RTP Transaction Flow
┌─────────────────────────────────────────────────────────────────────────────┐
│ RTP TRANSACTION FLOW │
│ (Settlement < 20 seconds) │
└─────────────────────────────────────────────────────────────────────────────┘
PAYER PAYER FI RTP NETWORK PAYEE FI PAYEE
(Sender) (Bank A) (TCH Clearing) (Bank B) (Receiver)
│ │ │ │ │
│ │ │ │ │
│ 1. Initiate Payment │ │ │ │
│ (mobile/web app) │ │ │ │
│────────────────────────▶│ │ │ │
│ │ │ │ │
│ │ 2. Validate: │ │ │
│ │ • Funds │ │ │
│ │ • Limits │ │ │
│ │ • Fraud check │ │ │
│ │ │ │ │
│ │ 3. Send to RTP │ │ │
│ │─────────────────────────────────────▶│ │
│ │ │ │ │
│ │ │ 4. Route to │ │
│ │ │ Payee FI │ │
│ │ │─────────────────▶ │
│ │ │ │ │
│ │ │ │ 5. Validate: │
│ │ │ │ • Account exists │
│ │ │ │ • Account active │
│ │ │ │ • Can receive │
│ │ │ │ │
│ │ │ │ 6. Credit account │
│ │ │ │──────────────────────▶
│ │ │ │ │
│ │ │ │ 7. Send confirmation│
│ │ │ 8. Confirm │◀─────────────────────│
│ │ 9. Confirm │◀───────────────── │
│ 10. Confirmation │◀───────────────── │ │ │
│◀────────────────────────│ │ │ │
│ │ │ │ │
│ │ │ │ │
│ 11. SETTLEMENT (Immediate - same message) │
│ │ │ │ │
│ │ Debit Payer FI │ │ │
│ │◀──────────────────── │ │
│ │ │ │ │
│ │ │ Credit Payee FI│ │
│ │ │─────────────────▶ │
│ │ │ │ │
TOTAL TIME: 5-20 seconds from initiation to funds available
KEY DIFFERENCES FROM ACH:
────────────────────────
• No batch processing (each transaction processed individually)
• No end-of-day settlement (settles as transaction processes)
• No return windows (irrevocable once confirmed)
• Works 24/7/365 (no business day restrictions)
RTP Growth and Statistics
┌─────────────────────────────────────────────────────────────────────────────┐
│ RTP NETWORK GROWTH (2017-2024) │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ LAUNCH: November 2017 │
│ ────────────────────── │
│ Initial participants: 25 financial institutions │
│ Coverage: ~50% of US demand deposit accounts │
│ │
│ 2024 STATISTICS: │
│ ──────────────── │
│ Volume: 343 million payments (+38% YoY) │
│ Value: $246 billion (+94% YoY) │
│ Participants: 1,000+ financial institutions (+67% growth in 2024) │
│ Daily Volume: 1M+ transactions per day │
│ │
│ Average Transaction Size: $717 ($246B / 343M) │
│ │
│ TRANSACTION LIMIT EVOLUTION: │
│ ───────────────────────────── │
│ 2017 Launch: $25,000 │
│ March 2020: $100,000 │
│ July 2022: $1,000,000 │
│ Feb 9, 2025: $10,000,000 (upcoming) │
│ │
│ TOP USE CASES (2024): │
│ ────────────────────── │
│ 1. Gig economy / instant payouts (DoorDash, Uber, Lyft) │
│ 2. Insurance claim payments │
│ 3. Account-to-account transfers (A2A) │
│ 4. B2B urgent payments │
│ 5. Earned wage access (on-demand salary) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
RTP Pricing Model
Unlike ACH (which is very cheap), RTP has higher per-transaction costs:
| Pricing Component | Cost | Billed To |
|---|---|---|
| Sending FI fee | $0.045/transaction | Payer's bank |
| Receiving FI fee | $0.01/transaction | Payee's bank |
| Network fee | Varies | Both FIs |
| Typical merchant cost | $0.50-$1.00/transaction | End customer (passed through) |
RTP Cost vs Value
While RTP costs 2-5x more than ACH ($0.50-$1.00 vs $0.20-$0.30), the instant settlement provides significant value:
- Reduces working capital needs
- Enables just-in-time payments
- Improves customer experience
- Eliminates return risk (irrevocable)
For gig economy platforms paying drivers, the instant payout experience justifies the higher cost.
Request for Payment (RfP)
One of RTP's most powerful features:
┌─────────────────────────────────────────────────────────────────────────────┐
│ REQUEST FOR PAYMENT (RfP) FLOW │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ Traditional payments are "pull" (merchant debits customer account) │
│ RfP enables "push" (customer sends payment on request) │
│ │
│ EXAMPLE: Utility Bill Payment via RfP │
│ ────────────────────────────────────── │
│ │
│ DAY 1: Bill Generated │
│ ──────────────────── │
│ │
│ Utility Company Customer │
│ │ │ │
│ │ 1. Send RfP via RTP network │ │
│ │ ────────────────────────────────────────────────────▶ │ │
│ │ │ │
│ │ RfP Details: │ │
│ │ • Amount: $150.00 │ │
│ │ • Due Date: Jan 15, 2025 │ │
│ │ • Account #: 123-456-789 │ │
│ │ • Description: "Electric bill for Dec 2024" │ │
│ │ │ │
│ │ │ 2. Customer sees RfP │
│ │ │ in mobile banking │
│ │ │ app │
│ │ │ │
│ │ 3. Customer approves/declines │ │
│ │ ◀──────────────────────────────────────────────────── │ │
│ │ │ │
│ │ Customer Actions: │ │
│ │ [ Approve & Pay Now ] │ │
│ │ [ Schedule for Jan 15 ] │ │
│ │ [ Decline ] │ │
│ │ │ │
│ │ │ Customer clicks │
│ │ │ "Approve & Pay Now" │
│ │ │ │
│ │ 4. RTP payment initiated (customer → utility) │ │
│ │ ◀──────────────────────────────────────────────────── │ │
│ │ │ │
│ │ 5. Payment settles instantly │ │
│ │ Utility receives $150.00 in <20 seconds │ │
│ │ │ │
│ │
│ BENEFITS: │
│ ───────── │
│ • No ACH debit authorization needed (customer initiates) │
│ • No return risk (customer explicitly approves) │
│ • Better customer control (approve/decline/schedule) │
│ • Rich remittance data (invoice number, description) │
│ • Instant settlement │
│ │
│ VS. TRADITIONAL ACH DEBIT: │
│ ────────────────────────── │
│ ACH: Merchant debits customer → Customer can return/dispute for 60 days │
│ RfP: Customer approves payment → Irrevocable, no returns │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
FedNow Service (Federal Reserve)
FedNow launched July 20, 2023, as the Federal Reserve's instant payment service.
FedNow vs RTP Comparison
┌─────────────────────────────────────────────────────────────────────────────┐
│ FedNow vs RTP COMPARISON │
├──────────────────┬──────────────────────────┬───────────────────────────────┤
│ Attribute │ FedNow │ RTP │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Operator │ Federal Reserve (govt) │ The Clearing House (private) │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Launch Date │ July 2023 │ November 2017 (6 years older) │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Participants │ 1,500+ FIs (all 50 states)│ 1,000+ FIs │
│ (2024-2025) │ │ │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Transaction Limit│ $10M (Nov 12, 2025) │ $1M → $10M (Feb 9, 2025) │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Pricing (FI) │ $0.045/transaction │ $0.045 send, $0.01 receive │
│ │ (sender pays, receiver │ │
│ │ free for first 5 years) │ │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Request for │ Planned (not yet live) │ Available since 2021 │
│ Payment (RfP) │ │ │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Reach │ Broader (Fed has │ Concentrated in largest banks │
│ │ universal FI coverage) │ (but growing rapidly) │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Growth Rate │ 645% YoY (Q3 2024-2025) │ 38% YoY (2024) │
│ │ (from low base) │ │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Settlement │ Instant (<20 sec) │ Instant (<20 sec) │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Availability │ 24/7/365 │ 24/7/365 │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Message Format │ ISO 20022 │ ISO 20022 │
├──────────────────┼──────────────────────────┼───────────────────────────────┤
│ Fraud Monitoring │ Fed oversight │ TCH oversight │
└──────────────────┴──────────────────────────┴───────────────────────────────┘
FedNow Growth Trajectory
┌─────────────────────────────────────────────────────────────────────────────┐
│ FedNow SERVICE GROWTH (2023-2025) │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ JULY 2023: LAUNCH │
│ ────────────────── │
│ Initial participants: 35 financial institutions │
│ Certified service providers: 16 │
│ │
│ Q3 2024: │
│ ──────── │
│ Participating FIs: ~600 │
│ Transaction volume: Low (ramping up) │
│ │
│ Q3 2025: │
│ ──────── │
│ Participating FIs: 1,500+ (all 50 states) │
│ Growth: 645% YoY increase in transaction volume │
│ Estimated annual volume: ~10 million payments │
│ Estimated annual value: $20 billion+ │
│ │
│ TRANSACTION LIMIT EVOLUTION: │
│ ───────────────────────────── │
│ July 2023 launch: $500,000 │
│ Nov 12, 2025: $10,000,000 │
│ │
│ PROJECTION (2027): │
│ ─────────────────── │
│ Expected to reach 100M+ transactions/year │
│ May overtake RTP in volume (broader FI reach) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Why Two Networks?
A common question: Why does the US have both RTP and FedNow?
┌─────────────────────────────────────────────────────────────────────────────┐
│ WHY RTP AND FedNow CO-EXIST? │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ HISTORICAL CONTEXT: │
│ ─────────────────── │
│ • RTP launched 2017 (private sector initiative by The Clearing House) │
│ • Fed announced FedNow development in 2019 │
│ • Community banks wanted Fed-operated option (concern about private │
│ monopoly, pricing power) │
│ • Fed's mandate: ensure all FIs have access to payment infrastructure │
│ │
│ ARGUMENTS FOR FedNow: │
│ ────────────────────── │
│ ✓ Universal access (all FIs can join, not just TCH members) │
│ ✓ Non-profit pricing (Fed doesn't need to profit) │
│ ✓ Regulatory oversight (Fed can ensure compliance) │
│ ✓ Public good mandate (financial inclusion) │
│ │
│ ARGUMENTS FOR RTP: │
│ ──────────────────── │
│ ✓ First-mover advantage (6 years head start) │
│ ✓ Innovation speed (private sector moves faster) │
│ ✓ Market-driven features (RfP, fraud detection) │
│ ✓ Proven scale (343M payments in 2024) │
│ │
│ LIKELY OUTCOME: │
│ ──────────────── │
│ Both networks will co-exist, similar to: │
│ • Visa and Mastercard in card networks │
│ • ACH operators (Fed and EPN/TCH) │
│ │
│ FIs may participate in both networks │
│ Interoperability may develop over time │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Network Fragmentation
Unlike most countries with a single instant payment rail (UK: Faster Payments, Europe: SEPA Instant, India: UPI), the US has two networks. This creates integration complexity for platforms, which must choose one, both, or use aggregators.
Wire Transfers: CHIPS and Fedwire
Wire transfers predate real-time payment rails and serve large-value, time-sensitive transactions.
CHIPS (Clearing House Interbank Payments System)
┌─────────────────────────────────────────────────────────────────────────────┐
│ CHIPS (The Clearing House) │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ OVERVIEW: │
│ ──────── │
│ Operator: The Clearing House │
│ Participants: 42 largest financial institutions │
│ Daily Volume: ~500,000 payments │
│ Daily Value: ~$1.8 trillion │
│ Settlement: End-of-day net settlement │
│ Hours: 9:00 PM (prior day) to 5:00 PM ET │
│ │
│ SETTLEMENT MODEL: Net Settlement │
│ ──────────────────────────────────── │
│ Unlike Fedwire (gross settlement), CHIPS uses multilateral net settlement: │
│ │
│ Throughout the day: │
│ • Participants send/receive payments │
│ • CHIPS tracks net positions │
│ │
│ End of day: │
│ • CHIPS calculates each bank's net position │
│ • Net debtors send funds to CHIPS │
│ • CHIPS distributes to net creditors │
│ • Final settlement via Fedwire │
│ │
│ TYPICAL USES: │
│ ────────────── │
│ • International payments (USD leg of FX transactions) │
│ • Large interbank transfers │
│ • Securities settlement │
│ • Correspondent banking │
│ │
│ COST: │
│ ────── │
│ Varies by participant volume, typically $10-$30 per transaction │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Fedwire (Federal Reserve)
┌─────────────────────────────────────────────────────────────────────────────┐
│ FEDWIRE (Federal Reserve) │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ OVERVIEW: │
│ ──────── │
│ Operator: Federal Reserve Banks │
│ Participants: 9,000+ financial institutions │
│ Daily Volume: ~800,000 payments │
│ Daily Value: ~$4 trillion │
│ Settlement: Real-Time Gross Settlement (RTGS) │
│ Hours: 9:00 PM (prior day) to 6:30 PM ET │
│ │
│ SETTLEMENT MODEL: Real-Time Gross Settlement (RTGS) │
│ ────────────────────────────────────────────────────── │
│ Each transaction settles individually and immediately: │
│ │
│ 1. Sender initiates wire transfer │
│ 2. Fed debits sender's account immediately │
│ 3. Fed credits receiver's account immediately │
│ 4. Settlement is final and irrevocable │
│ │
│ No netting, no batch processing, no delays │
│ │
│ TYPICAL USES: │
│ ────────────── │
│ • Real estate transactions (home purchases, commercial property) │
│ • Large business payments (>$1M) │
│ • Securities settlement (bonds, stocks) │
│ • International wire transfers (outgoing USD) │
│ • Time-sensitive, high-value transfers │
│ │
│ COST: │
│ ────── │
│ Fed fee: $0.715 per transaction (to FI) │
│ FI markup: $10-$35 (typical customer charge) │
│ Total: $10.72-$35.72 per wire │
│ │
│ SECURITY: │
│ ────────── │
│ • Most secure payment method (Fed-operated) │
│ • Requires explicit authorization (not automated) │
│ • Non-reversible (finality) │
│ • Fraud rare but high-impact when it occurs │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
CHIPS vs Fedwire Comparison
| Attribute | CHIPS | Fedwire |
|---|---|---|
| Operator | The Clearing House (private) | Federal Reserve (government) |
| Participants | 42 largest banks | 9,000+ FIs |
| Settlement | Net (end of day) | Gross (real-time) |
| Daily Volume | ~500K | ~800K |
| Daily Value | ~$1.8T | ~$4T |
| Hours | 9 PM - 5 PM ET | 9 PM - 6:30 PM ET |
| Typical Use | International, interbank | Domestic, real estate, securities |
| Cost | $10-$30 | $10.72-$35.72 |
Use Case Comparison
When to Use Each Rail
┌─────────────────────────────────────────────────────────────────────────────┐
│ PAYMENT RAIL SELECTION GUIDE │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ SCENARIO: Gig Economy Platform (Uber, DoorDash) │
│ ───────────────────────────────────────────────── │
│ Need: Instant payouts to drivers/dashers │
│ Frequency: Multiple times per day │
│ Amount: $20-$500 per payout │
│ │
│ ✓ BEST: RTP or FedNow │
│ • Instant settlement (driver sees money in seconds) │
│ • 24/7 availability (payouts anytime) │
│ • Irrevocable (no return risk) │
│ • Cost justified by UX improvement │
│ │
│ ✗ NOT: ACH (too slow, driver expects instant) │
│ ✗ NOT: Wires (too expensive for small amounts) │
│ │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ SCENARIO: SaaS Subscription Platform │
│ ────────────────────────────────── │
│ Need: Recurring monthly charges │
│ Frequency: Once per month │
│ Amount: $50-$500/month │
│ │
│ ✓ BEST: ACH │
│ • Lowest cost ($0.20-$0.50 vs $0.50-$1.00 RTP) │
│ • T+1/T+2 settlement acceptable │
│ • Pull mechanism (merchant-initiated) │
│ • Proven reliability │
│ │
│ ✗ NOT: RTP/FedNow (unnecessary cost for non-urgent) │
│ ✗ NOT: Cards (2-3x more expensive) │
│ │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ SCENARIO: Real Estate Closing │
│ ──────────────────────────────── │
│ Need: Secure, irrevocable transfer │
│ Frequency: One-time │
│ Amount: $50,000 - $5,000,000 │
│ │
│ ✓ BEST: Fedwire │
│ • Proven for real estate transactions │
│ • Real-time gross settlement (RTGS) │
│ • Most secure (Fed-operated) │
│ • No amount limit │
│ • Title companies trust wires │
│ │
│ ✓ ALTERNATIVE: RTP/FedNow (if < $10M, after Feb/Nov 2025 limit increases) │
│ ✗ NOT: ACH (return risk unacceptable) │
│ │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ SCENARIO: Insurance Claim Payment │
│ ─────────────────────────────────── │
│ Need: Fast settlement to policyholder │
│ Frequency: Ad-hoc (when claim approved) │
│ Amount: $500 - $100,000 │
│ │
│ ✓ BEST: RTP or FedNow │
│ • Fast settlement (critical in emergencies) │
│ • Customer satisfaction (claim paid instantly) │
│ • Cost acceptable for customer goodwill │
│ │
│ ✓ ALTERNATIVE: Same-Day ACH (if 3 daily windows acceptable) │
│ ✗ NOT: Standard ACH (T+2 too slow for urgent need) │
│ │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ SCENARIO: B2B Invoice Payment │
│ ─────────────────────────────── │
│ Need: Large invoices with remittance data │
│ Frequency: Weekly/monthly │
│ Amount: $10,000 - $500,000 │
│ │
│ ✓ BEST: ACH CCD (with addenda for remittance) │
│ • Lowest cost for large amounts │
│ • Addenda records for invoice matching │
│ • T+1/T+2 acceptable for B2B terms │
│ │
│ ✓ ALTERNATIVE: RTP/FedNow RfP (if instant settlement needed) │
│ • Request for Payment enables rich remittance data │
│ • Instant settlement improves working capital │
│ • Higher cost justified by faster cash flow │
│ │
│ ✗ NOT: Cards (too expensive for large B2B amounts) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
PayFac Integration Considerations
Platform Decision: Build vs Partner
| Approach | Pros | Cons | Best For |
|---|---|---|---|
| Build direct (connect to RTP/FedNow) | Full control, lowest transaction fees, feature flexibility | High upfront cost ($500K-$2M), compliance burden, ongoing maintenance | Large platforms (>$1B annual volume) |
| Partner with processor | Faster launch (weeks vs months), shared compliance, proven infrastructure | Higher per-transaction fees, limited feature control, dependency | Most PayFac platforms |
| Use aggregator (Stripe, Modern Treasury) | Easiest integration (API), no compliance burden, multi-rail support | Highest fees, least control, vendor lock-in | Startups, SMB-focused platforms |
NestJS Integration Example (Modern Treasury)
// real-time-payment.service.ts
import { Injectable } from '@nestjs/common';
import { ModernTreasuryClient } from './clients/modern-treasury.client';
export enum PaymentRail {
RTP = 'rtp',
FEDNOW = 'fednow',
WIRE = 'wire',
ACH = 'ach',
}
@Injectable()
export class RealTimePaymentService {
constructor(private modernTreasury: ModernTreasuryClient) {}
/**
* Send instant payment via RTP or FedNow
*
* @param merchantId - Sub-merchant ID
* @param recipientBankAccount - Recipient's bank account details
* @param amount - Amount in cents
* @param rail - Payment rail (RTP or FedNow)
* @param description - Payment description (up to 140 chars)
*/
async sendInstantPayment(
merchantId: string,
recipientBankAccount: {
routingNumber: string;
accountNumber: string;
accountName: string;
},
amount: number,
rail: PaymentRail.RTP | PaymentRail.FEDNOW,
description: string,
) {
// Validate amount (must be ≤ $10M for both networks as of 2025)
const maxAmount = 10_000_000_00; // $10M in cents
if (amount > maxAmount) {
throw new Error(`Amount exceeds ${rail.toUpperCase()} limit of $10,000,000`);
}
// Check merchant balance (instant payments require prefunding)
const merchantBalance = await this.getMerchantBalance(merchantId);
if (merchantBalance < amount) {
throw new Error('Insufficient merchant balance for instant payout');
}
// Create payment order
const paymentOrder = await this.modernTreasury.createPaymentOrder({
type: 'payment',
amount,
direction: 'credit', // Sending money
originatingAccountId: await this.getMerchantAccountId(merchantId),
receivingAccount: {
routingNumber: recipientBankAccount.routingNumber,
accountNumber: recipientBankAccount.accountNumber,
accountName: recipientBankAccount.accountName,
},
description,
statementDescriptor: description.substring(0, 18), // Max 18 chars
priority: 'high',
effectiveDate: new Date().toISOString().split('T')[0], // Today
ledgerTransaction: {
description: `${rail.toUpperCase()} payout - ${description}`,
},
metadata: {
merchantId,
paymentRail: rail,
},
});
// Modern Treasury automatically selects RTP/FedNow based on receiving bank capabilities
// and "priority: high" flag
return {
paymentId: paymentOrder.id,
status: paymentOrder.status, // 'processing', 'sent', 'completed', 'failed'
expectedSettlement: 'instant', // <20 seconds
estimatedFee: this.calculateRTPFee(amount),
};
}
/**
* Send wire transfer (Fedwire)
*/
async sendWireTransfer(
merchantId: string,
recipientBankAccount: {
routingNumber: string;
accountNumber: string;
accountName: string;
address?: string;
},
amount: number,
description: string,
beneficiaryInfo?: {
name: string;
address: string;
reference: string;
},
) {
// Check Fedwire hours (9 PM prior day to 6:30 PM ET)
const now = new Date();
const etHour = now.getUTCHours() - 5; // Rough EST conversion
if (etHour >= 18.5 || etHour < 21) {
throw new Error('Fedwire is not available at this time (hours: 9 PM - 6:30 PM ET)');
}
const paymentOrder = await this.modernTreasury.createPaymentOrder({
type: 'wire',
amount,
direction: 'credit',
originatingAccountId: await this.getMerchantAccountId(merchantId),
receivingAccount: {
routingNumber: recipientBankAccount.routingNumber,
accountNumber: recipientBankAccount.accountNumber,
accountName: recipientBankAccount.accountName,
},
description,
priority: 'high',
remittanceInformation: beneficiaryInfo?.reference,
metadata: {
merchantId,
paymentRail: 'wire',
beneficiaryName: beneficiaryInfo?.name,
beneficiaryAddress: beneficiaryInfo?.address,
},
});
return {
paymentId: paymentOrder.id,
status: paymentOrder.status,
expectedSettlement: 'same-day',
estimatedFee: this.calculateWireFee(),
};
}
/**
* Handle payment status webhook from Modern Treasury
*/
async handlePaymentStatusWebhook(payload: {
eventType: string;
paymentOrderId: string;
status: string;
failureReason?: string;
}) {
switch (payload.eventType) {
case 'payment_order.completed':
// Payment successfully sent and confirmed by receiving bank
await this.updatePaymentStatus(payload.paymentOrderId, 'completed');
break;
case 'payment_order.returned':
// Payment was returned (rare for RTP/FedNow due to pre-validation)
await this.handlePaymentReturn(payload.paymentOrderId, payload.failureReason);
break;
case 'payment_order.failed':
// Payment failed (invalid account, network error, etc.)
await this.handlePaymentFailure(payload.paymentOrderId, payload.failureReason);
break;
}
}
/**
* Calculate RTP/FedNow fee
*/
private calculateRTPFee(amount: number): number {
// Typical pricing: $0.50-$1.00 per transaction
// Assume $0.75 base + 0.1% of amount
const baseFee = 75; // $0.75 in cents
const variableFee = Math.floor(amount * 0.001); // 0.1%
return Math.min(baseFee + variableFee, 100); // Cap at $1.00
}
/**
* Calculate wire transfer fee
*/
private calculateWireFee(): number {
return 2500; // $25.00 flat fee
}
}
Request for Payment (RfP) Implementation
// request-for-payment.service.ts
import { Injectable } from '@nestjs/common';
import { ModernTreasuryClient } from './clients/modern-treasury.client';
@Injectable()
export class RequestForPaymentService {
constructor(private modernTreasury: ModernTreasuryClient) {}
/**
* Send Request for Payment (RfP) via RTP network
*
* Example: Utility bill, invoice payment
*/
async sendPaymentRequest(
merchantId: string,
customerBankAccount: {
routingNumber: string;
accountNumber: string;
},
amount: number,
dueDate: Date,
invoiceNumber: string,
description: string,
) {
// Create RfP via Modern Treasury (or direct RTP API)
const rfp = await this.modernTreasury.createPaymentRequest({
type: 'request_for_payment',
amount,
direction: 'debit', // Requesting money from customer
counterpartyAccount: {
routingNumber: customerBankAccount.routingNumber,
accountNumber: customerBankAccount.accountNumber,
},
dueDate: dueDate.toISOString(),
description,
metadata: {
merchantId,
invoiceNumber,
},
});
// RfP is sent to customer's bank
// Customer will see it in mobile banking app
return {
requestId: rfp.id,
status: 'pending', // Awaiting customer response
expiresAt: dueDate,
};
}
/**
* Handle RfP response webhook
*/
async handleRfPResponse(payload: {
requestId: string;
status: 'approved' | 'declined' | 'expired';
paymentId?: string;
}) {
if (payload.status === 'approved') {
// Customer approved - RTP payment will be initiated automatically
// Funds will arrive in <20 seconds
await this.updateInvoiceStatus(payload.requestId, 'paid');
} else if (payload.status === 'declined') {
// Customer declined payment request
await this.updateInvoiceStatus(payload.requestId, 'declined');
// Merchant may follow up with customer or send reminder
} else if (payload.status === 'expired') {
// RfP expired without response
await this.updateInvoiceStatus(payload.requestId, 'expired');
// Merchant may resend RfP or use alternative collection method
}
}
}
Self-Assessment Questions
-
What is the key difference between RTP and ACH in terms of settlement timing?
-
Why are RTP and FedNow payments irrevocable (no returns), while ACH allows returns for up to 60 days?
-
When would you choose Fedwire over RTP/FedNow for a payment?
-
What is Request for Payment (RfP), and how does it differ from traditional merchant-initiated debits?
-
A platform wants to offer instant payouts to gig workers. Which payment rail should they use, and why?
See quiz.md for answers and additional questions.
Related Topics
- Alternative Payment Methods Overview - Compare real-time rails to ACH, cards, wallets
- ACH & NACHA - Traditional batch processing alternative
- Transaction Lifecycle - Card payment timing comparison
- PayFac Implementation - Platform architecture considerations
References
Official Sources
- RTP Network (The Clearing House) - Official RTP documentation
- FedNow Service - Federal Reserve instant payments
- Fedwire Funds Service - Wire transfer system
- CHIPS - Large-value payment system
Industry Reports
- The Clearing House RTP Network Growth Reports (quarterly)
- Federal Reserve FedNow Adoption Statistics
- ACI Worldwide Real-Time Payments Report
- Mercator Advisory Group Instant Payments Research
Integration Partners
- Modern Treasury - Multi-rail payment operations platform
- Dwolla - ACH and real-time payment APIs
- Finix - PayFac platform with RTP support
- Stripe Treasury - Banking-as-a-Service with instant payouts