What is RTP and How it Compares with Faster Payments

Trustly

Faster Payments and Real Time Payments (RTPs) are both big buzzwords in the financial services industry. Few outside of finance understand the difference between them, and it’s no help that many use the terms interchangeably.

Here’s how faster payments and RTPs are distinct from each other, and their importance for consumers and businesses in different industries.

Faster Payments vs Real-Time Payments

Real Time Payments and Faster Payments are similar to each other, but they aren’t exactly the same thing. Here’s the definition of faster payment capabilities according to the Federal Reserve’s Faster Payments Task Force Charter:

“A ubiquitous, safe, faster electronic solution(s) for making a broad variety of business and personal payments, supported by a flexible and cost-effective means for payment clearing and settlement groups to settle their positions rapidly and with finality.”

So faster payments can be any type of payment method that posts and settles quickly compared to traditional methods. This leaves some room for interpretation, but those in finance generally agree faster payments include methods that issue confirmations within 15 seconds, with transactions completed within two hours.

So faster payments don’t need to be instant (although they could be). Examples of faster payment solutions include debit push payments, Nacha’s Same Day ACH, and money transfer services like Zelle, Venmo, PayPal, WorldRemit, etc.

The Real Time Payments Difference

Real time payments include solutions that can initiate and settle payments instantaneously. This is a type of faster payment that doesn’t require minutes or hours to post transactions. Examples of real-time payment solutions available today include The Federal Reserve’s FedNow, The Clearing House’s RTP Network, and SWIFT’s gpi Service. The FedNow instant payments program is still in the pilot phase but is expected to significantly impact the growth of real-time payments in the near future. That said, over half of US bank accounts are already connected to real-time rails.

Meeting Consumer Expectations

Many businesses that already use some form of faster payments are likely wondering if investing in RTP is really necessary. Unless someone compulsively checks their bank account, they might not even see a difference between receiving faster payments and RTPs. However some generational trends suggest otherwise.

According to a recent PYMNTS.com report, Millennials (25.8%) and Gen Z (26.7%) are the most likely cohorts to have received instant payments in the past. They’re receiving insurance disbursements and making investments through instant payments more than any other generation. They also prefer digitally native companies that have existing systems that make instant payments possible. As RTP options become more widely available for businesses, these expectations are unlikely to change.

Use Cases and Benefits for Businesses

As faster payments and RTP become the norm for more transaction types, their relevance for numerous industries comes to light. Utilizing real-time payments can help businesses meet customer expectations and streamline internal processes for insurance payouts, bill payments, financing startups, paying small business suppliers, gig economy compensation, and more.

One industry that’s expected to benefit significantly from adopting RTP solutions is online casinos. The appeal of gambling comes from making quick investments, which is limited when transactions take minutes or hours to process. Players also want to quickly withdraw their winnings to their bank accounts.

Trustly's Pay N Play solution helps online casinos fix this customer experience issue while also improving user sign-ups and deposits. In an industry where 24% of players drop out during the registration process and only a third make a deposit in the first 24 hours, streamlining player sign up experience offers huge opportunities to drive revenue and growth.

Online casinos are a strong example of the potential benefits real-time payments offer, which can apply to all sorts of businesses across industries. Trustly’s RTP solution also offers guaranteed payments, helping businesses lower payment processing costs and increase approval rates.

The Bottom Line

While faster payments have already become the norm for all sorts of services, real-time payments are just now becoming a major opportunity in the financial space. Some consumers see little distinction between faster payments and RTP, while others (younger generations specifically) now expect instant service. Considering that and the numerous ways RTPs can improve business processes and revenue, it’s worthwhile for companies to adopt this payment system in the long run.

If you would like to see how Trustly could help your business with guaranteed and faster Payments, feel free to reach out to us at sales.us@trustly.com.