The Real-Time Payments (RTP) system from the US Clearing House is going to disrupt the financial landscape in 2021. While these newest payment rails were launched in November 2017, this coming year looks like it might see the widespread adoption of the system. At the moment, the network reaches 56% of US direct deposit accounts. Why do we think its prime time is about to come, and what’s the big deal about RTP anyway?
Why RTP is a Game-Changer
The RTP system is the only payment network that allows for instant and cheap money transfers in the US. We covered the current state of the US system in depth in our previous blog post here. In short, currently businesses have to choose between cost and speed in their payment methods. Fast payments are possible with credit/debit cards or wire transfers, but both come with hefty fees. Cheap methods like ACH and paper checks, on the other hand, are slow and inefficient.
RTP is the system to liberate businesses from their current Catch-22. Network fees are small, at $0.045 per transfer, and settlement occurs in seconds, 24/7. This is faster than credit card payments or wire transfers, at a fraction of the cost!
Furthermore, RTP comes with increased security, since it is the only US payment system built specifically for the Internet age. Merchants can also depend on guaranteed payment, without the threat of chargebacks. (Read our thoughts on chargebacks here)
The system works for all kinds of transactions — P2P, B2B, B2C, C2B. Consumers, businesses, and government entities can all use RTP.
Lastly, RTP offers more communication tools for its transactions. These include real-time messaging between the receiver and sender and remittance data.
Why is RTP not widely used?
Given this wide variety of benefits, why has RTP not caught on as a mainstream method of payment? While there are complex reasons for this, we think there are two main factors.
First, lack of incentives. Until 2020 there weren’t that many incentives to explore alternative methods of payment to widespread paper checks and cash. With the pandemic, however, there has been a push to contactless methods of payment. The most popular are credit and debit cards. However, after months of increasing dependency on them, businesses are learning that card fees are expensive and simply not worth it. Because of this, we believe that in 2021 more businesses and consumers will be open to trying out new payment rails, such as RTP.
Second, difficulty of integration. While businesses can integrate payments directly into their systems, they need to integrate with each bank individually. With more than 4000 banks in the United States, RTP integration becomes impossible for small and medium size businesses. This means that for RTP to become more widespread, a simpler, unified integration method needs to become available.