Imagine the ability to send and receive funds in a matter of seconds. What would that kind of speed do for your business? Automatic reconciliation, closing the books every day, and providing reassurance to a vendor through an instant payment (or vice versa) all come to mind.
Instant payments and their accompanying benefits may seem far off, but they have already become a reality. A new payments system called RTP (short for Real-Time Payments), written and operated by The Clearing House, went live on November 13, 2017. BNY Mellon made the first payment on the RTP network - a whopping $3.50, sent to an account at U.S. Bank.
Participation in the The Clearing House’s RTP network is currently limited to 6 major banks - BNY Mellon, U.S. Bank, Citibank, JPMorgan Chase, PNC Financial Services Group, and SunTrust Bank. The Clearing House hopes to add 19 more large banks in the next 2 years, with a goal of making RTP available to all U.S. financial institutions by 2020.
Along with speed comes detailed payment details
In addition to lightning-fast payments, another major benefit of the new RTP network is the set of data passed along with each funds transfer. The Clearing House built a set of standard inputs into the process.
When receiving funds via other methods like checks, wire transfers, and ACH payments, businesses may lack the necessary information to associate a payment with an invoice. That missing data can cause delays as the business follows up to find out who the payment is from and what it is for.
With payments on the RTP network, data such as the sender, total paid, payment reason, and confirmation are all required to send funds. RTP sends data using the widely-accepted format called ISO 20022, the universal financial industry message scheme. The data currently available can be summed up in 5 message types - credit transfer, request for payment, payment acknowledgement by receiver, request for information & response, and remittance advice.
Getting started with the RTP network and instant payments
If you’re a user of any of the 6 participating banks, you can start using instant payments on the RTP network today. The only major restriction is a $25,000 cap on payments, which will be removed in the future.
The real work for businesses looking to take advantage of the RTP network is to build internal infrastructure to ingest payments and their associated data in real-time as well. That means looking at each message type on the RTP network and all its data inputs, and next determining what they match up to in existing systems. This process will require internal resources, external consulting support, or a mixture of both.
Are you considering Real-Time Payments for your business?
We’d love to learn more about how the RTP network can support your business’s needs. Contact us to share your goals, and learn how Invoiced can connect with RTP through a customized demo.