By canadianmerchantservices July 26, 2025
Real-time payments (RTPs) are rapidly transforming how companies conduct transactions — and card-heavy companies need to take notice. As the value of instant payments is projected to hit $284.49 billion by 2032, advancing at a CAGR of 35.4%, the transformation to real-time settlement is more than a trend — it’s a revolution. As implementations such as FedNow and The Clearing House’s RTP network pick up speed, companies with heavy dependence on credit and debit card payments have to change in order to remain competitive, save on costs, and keep up with shifting customer demands.
What Is FedNow and Which Banks Use It?
FedNow is the Federal Reserve real-time payment system enabling financial institutions to receive and send funds instantly, around the clock, 24/7. Introduced in July 2023 following a pilot that started in 2021, FedNow initially involved 41 banks and 15 service providers.
In contrast to usual ACH transfers that settle 1–3 business days later, FedNow payments are settled immediately. The maximum default transaction amount is $100,000, but it can be set by banks to a lower amount with a maximum limit of $500,000.
Any U.S. credit union or bank with a Master Account at the Federal Reserve can join FedNow. Fintechs and neobanks can also access the network by having an alliance with a participating institution. Consumers are only able to use FedNow when their service provider or bank has it.
FedNow facilitates various use cases such as bill payments, payroll payments, account-to-account (A2A) and person-to-person (P2P) transfers, and funding digital wallets. In the future, it will also be utilized for e-commerce and offline retail transactions.
How FedNow System Operates
FedNow facilitates real-time payments within seconds. This is how the process works:
- The sender logs in to their bank’s website or mobile app, inputs the recipient’s information (such as name and account details), and enters the amount to transfer.
- The sender’s bank verifies that there are enough funds available, deducts from the account, and informs the recipient’s bank through ISO 20022 messaging standards.
- The recipient bank checks for valid transactions and account details.
- It then accepts receipt and deposits the funds into the recipient’s account.
- Both the sender and the recipient are immediately notified that the payment is made.
- FedNow payments are final and cannot be reversed if they’re processed.
How Much Does FedNow Cost?
FedNow charges participating banks a few standard fees, here is FedNow pricing broken down:
- $25 monthly participation fee (waived for 2023)
- $0.045 per credit transfer or return
- $1.00 per liquidity management transfer (LMT)
- $0.01 per request for payment (RFP) message
Although billed to banks, they might charge forward—either directly with markups or along with other charges—to customers such as neobanks or fintech platforms that use FedNow access.
What Is Real Time Payments and How It Works
In contrast to ACH transfers, RTP (Real-Time Payments) only accommodates credit or “push” payments. You can’t pull or debit funds from someone else’s account. As money is deposited immediately, each payment is irrevocable once it’s made—there’s no taking it back or reversing it. That also means an end to NSF failed payments, which occur frequently with ACH debits.
For example, if an insurer attempts to draw a premium from a customer account that is short of funds, the ACH transaction will bounce. With RTP, the sender pays out of pocket, and therefore, there is no chance of rejection.
RTP also accommodates rich data with every transaction. For instance, Airbnb can send payment to hosts including the reservation details such as the ID of the reservation and duration of the stay. Companies processing invoices can attach invoice numbers directly to payments, and this facilitates reconciliation faster and better.
RTP is another significant advantage because it operates 24/7/365. It doesn’t have weekends, holidays, or after-hours off like ACH and wire transfers do. ACH payments are batch processed, so you need to keep an eye on your bank’s cut-off times if you want to know when a payment will actually be made. RTP gets rid of that uncertainty.
All RTP payments are processed by The Clearing House. When you pay a bill using RTP, your bank sends a message over the RTP network with all of the payment information. The Clearing House directs that message to the receiving bank, settling the transaction in seconds. RTP also employs the ISO 20022 messaging standard, which supports data-rich and status-aware payments.
Real-Time Payments (RTP) vs. FedNow: Reach, Fees, and Liquidity
Both FedNow and RTP are real-time payment systems in the U.S., but each has several distinctive features. RTP, which was introduced in 2017 by The Clearing House (owned by a group of large U.S. banks), has greater current usage, with almost 400 participants. FedNow, introduced in 2023, has fewer participants but will likely become more widespread over time, especially among smaller credit unions and banks.
One of the key differences is liquidity management. FedNow mandates participants to hold adequate balances within their Federal Reserve Master Accounts or utilize a partner bank that use it. It also comes equipped with a liquidity management tool, enabling financial institutions to immediately transfer funds to each other at any time—something that was necessitated by Fedwire, which only runs during business hours.
RTP, on the other hand, employs a shared account in the Federal Reserve Bank of New York to clear payments but not the real-time liquidity aspect that FedNow provides. This implies that RTP participants can use a higher reserve to facilitate easy transactions.
As regards fees, both systems provide comparable and relatively comparable costs of transactions, albeit with variation in setup and participation fees, as well as transaction thresholds.
Fee Types | RTP | FedNow |
Transfer fee | $0.045 | $0.045 |
Request for payment fee | $0.01 | $0.01 |
Participation fee | $0 | $25 |
Transfer limit | $1,000,000 | $500,000 |
How Real-Time Payments Help Merchants
Real-time payments (RTP) aren’t just a convenience for consumers paying friends or buying online—they also provide substantial benefits to businesses. Here are ways they help merchants simplify, save money, and provide improved experiences:
1. Faster Payments, Fewer Headaches
RTPs settle in seconds, cutting out delays associated with legacy payment means. Merchants no longer have to wait days for payments to settle or handle failed transactions that need manual follow-up. Back-office inefficiency is minimized, with time and money saved.
2. Improved Cash Flow Management
When payments arrive in real-time, you have a real-time picture of your income. It becomes simpler to follow cash flow, prepare for the future, and make business decisions in a confident manner without having doubts about your financial situation.
3. Reduced Transaction Costs
RTPs eliminate card networks such as Visa or Mastercard, meaning no interchange fees—typically up to 4% of each transaction. After a while, this can translate to significant savings, particularly for high-volume companies.
4. Access to a Broader Customer Base
Many younger or underbanked consumers lack credit or debit cards. Real-time payments make digital payment access available to such groups and enable merchants to access new customer bases that had been out of reach for cashless commerce.
5. Instant Refunds Build Trust
Returns are a huge aspect of e-commerce—20% of online orders get returned. RTP lets you give refunds in real time, making customers happy and boosting their confidence in your brand. An easy, fast return process can translate to increased customer satisfaction and repeat business.
Challenges of Real-Time Payments
While RTPs provide convenience and speed, they also present a series of challenges that business owners will have to be willing and able to deal with.
1. Increased Vulnerability to Fraud
The real-time nature of RTP is both its most significant strength and its biggest weakness. As transactions clear in real time on systems such as RTP, Zelle, and FedNow, banks and payment providers have little time to mark suspicious activity as such. This exposes businesses to more fraud, with little ability to intervene after a transaction has cleared.
2. Limited Adoption and Interoperability Issues
In spite of the promise, real-time payment networks such as FedNow have had sluggish take-up—only about 5% of U.S. banks have joined up after almost a year. Interoperability is one of the biggest barriers. To provide the smooth experience RTP is designed to deliver, systems must be able to interact smoothly across multiple banks and platforms, both domestically and globally. Delivering that consistency continues to be a fraught task in an industry with a fractured payments landscape.
3. Infrastructure Demands
Rolling out real-time payments tends to necessitate the overhaul of existing systems by companies. This may involve the upgrading of fraud prevention software, enhancing cybersecurity, and incorporating RTP into existing payment systems through APIs. Such infrastructural renewal can be resource-intensive and time-consuming, particularly for small companies.
4. Regulatory Uncertainty
Real-time payments are not yet fully established in the U.S.—the RTP network opened in 2017—so the legal and regulatory compliance framework is still evolving. Companies have to remain at the forefront of changing compliance regulations and ensure their payment systems are up to date. Otherwise, they may invite legal exposure as the regulation evolves.
Conclusion
As RTP and FedNow grow, real-time payments are shaping up to be the new norm for fast, safe, and convenient transactions. For card-dense businesses, adopting these rails is not only a matter of keeping up — it’s about future-proofing operations, streamlining cash flow, and providing a more seamless customer experience. The transition is underway, and the early adopters will benefit most.
FAQs
How are FedNow and RTP different from each other?
FedNow is the Federal Reserve’s real-time payment system, and RTP is run by The Clearing House; both support real-time payments but are owned and operated differently.
Can all banks use RTP and FedNow?
Most U.S. banks and credit unions can utilize FedNow if they possess a Federal Reserve Master Account; RTP can be used by participating banks, primarily larger banks.
Are real-time payments reversible?
No, real-time payments on both RTP and FedNow are irrevocable and can’t be reversed after they are made.
What kinds of transactions do RTP and FedNow facilitate?
Both facilitate immediate credit or ‘push’ payments, which are suitable for bill payments, payroll, P2P transfers, and so on.
Do real-time payments incur higher costs than usual?
Transaction costs are typically similar to other forms of payment, but real-time payments can lower costs of operations by eliminating failures and delays.