Real-Time Payments
What Are Real-Time Payments? Definition and How They Work
Definition
Real-time payments (RTP) are payment systems that process and settle transactions immediately, 24 hours a day, 7 days a week, with funds available to the recipient within seconds of the payment being initiated.
How it works
Real-time payment networks are operated at the national level and settle interbank fund transfers in real time, outside the traditional batch-processing windows of card networks and ACH. In the US, The Clearing House operates the RTP network and the Federal Reserve operates FedNow (launched 2023). In the UK, Pay.UK operates Faster Payments. In Europe, the SEPA Instant Credit Transfer scheme handles real-time euro transfers. Brazil operates PIX, one of the most widely adopted real-time payment systems globally.
Real-time payment transactions are typically initiated as push payments: the payer instructs their bank to send funds to the payee's account. For merchant payment acceptance, this requires a payment initiation interface (such as a QR code, payment link, or API integration) that the customer uses to authorise the push from their bank account.
Settlement finality is immediate and irrevocable in most real-time payment schemes. Unlike card payments where authorisation holds are placed and settlement follows days later, real-time payments confirm settlement at the point of transaction. This finality has both advantages (guaranteed funds) and implications (no chargeback mechanism equivalent to card networks).
Real-time payment networks have transaction limits that vary by scheme: FedNow supports up to $500,000 per transaction; UK Faster Payments has limits set by individual banks; SEPA Instant handles up to 鈧100,000. High-value transactions above these limits must use alternative payment methods.
Why it matters
Real-time settlement changes cash flow dynamics fundamentally: for merchants using real-time payment acceptance, there is no T+1 or T+2 settlement float. Funds are available in the merchant's account within seconds. For cash-flow-sensitive businesses and marketplaces paying out to sellers, this is a significant operational improvement.
No chargeback mechanism is both an advantage and a risk: the absence of a card-network-style chargeback means fraudulent transactions cannot be recovered through a scheme dispute process. Real-time payment fraud recovery depends on the payer's bank and the payee's bank cooperating to reverse a transaction, which has no guaranteed outcome.
Consumer adoption drives acceptance value: real-time payment acceptance is only valuable if customers use it. In markets with high consumer adoption (Brazil's PIX, UK Faster Payments), real-time payment acceptance is effectively mandatory for mainstream merchants. In markets with lower adoption (US), it is an emerging channel that supplements card acceptance.
Lower transaction costs than card payments: real-time payment networks typically carry lower per-transaction fees than card schemes, with no interchange component. For merchants with high average transaction values or high card acceptance costs, real-time payments offer material cost reduction where consumer adoption supports it.
With PXP
PXP supports real-time payment acceptance in markets where it holds relevant payment institution licences. Open banking payment initiation via PXP connects to domestic faster payment rails in supported markets. Real-time payment transaction data is consolidated into PXP's unified reporting alongside card payment data.
Frequently asked questions
What is the difference between real-time payments and instant payments?
The terms are used interchangeably in most contexts. Both refer to payment systems that process and settle transactions within seconds, 24/7. Some markets distinguish between real-time gross settlement (RTGS) systems for high-value interbank transfers and retail real-time payment schemes (like FedNow, Faster Payments) for lower-value consumer and business payments. Retail real-time payment schemes are what most merchants mean when they discuss real-time payments.
Which real-time payment networks are available for merchant acceptance?
Key real-time payment networks for merchant acceptance include: UK Faster Payments (instant, no transaction limit per se, bank limits vary); SEPA Instant Credit Transfer (euro payments, up to EUR 100,000); FedNow (US, up to $500,000 per transaction, launched 2023); PIX (Brazil, widely adopted, 24/7, no transaction limit for standard transfers); and UPI (India, widely used for consumer-to-merchant payments via QR and payment links).
Do real-time payments replace card payments for merchants?
Not in most markets. Real-time payments supplement card acceptance rather than replacing it; they offer a lower-cost, faster-settling alternative for customers who prefer bank-based payments. Card payments remain dominant in most markets due to consumer familiarity, rewards programs, and the protection of chargeback rights. Real-time payments are most compelling in markets where card adoption is lower or where the cost advantage of avoiding interchange is significant.
How do merchants handle real-time payment fraud without chargeback rights?
Without a card-network chargeback mechanism, fraud prevention in real-time payments relies on payment initiation controls (requiring strong authentication before the payer authorises the push), fast detection and reporting to the sending bank (which may be able to freeze funds if reported quickly), and coordination through fraud dispute resolution frameworks operated by payment scheme operators. Prevention is more important than recovery in real-time payment fraud contexts.
Revolutionize your business with PXP
Take complete control of your commerce and payments with one platform.
Get Started