The real truth about merchant real-time payments 

While this narrative has placed minimal focus on fraud, it is worth noting that the evolution of payment technologies has been largely driven by fraud or the theft of value from rightful owners. As technology evolves, changes are bound to occur. RTP, an account-to-account (A2A) payment, is a payment technology developed by banks that has evolved in response to fraud, as ample technology now enables secure real-time access to value in a payer’s bank account without requiring a card or check. While nothing man-made is perfect, RTP is a very effective way to access funds or value in a user’s bank account because banks control access, and merchants simply need to enable secure real-time access to the funds in the payer’s bank account. This cuts out all the middlemen and their related, onerous, fee-laden processes.

Banks developed RTP to enable access to accounts they hold in custody. Banks do not have to use the same tools as non-bank payment providers. For example, while card brands have deployed security measures such as PIN, 3DS, EMV, tokenization, and encryption to help prevent card fraud, the prevalence of card fraud is directly related to the use of cards to access funds or value in bank accounts. Conversely, banks can invest in bespoke technologies that more closely align with secure direct access to bank accounts, and RTP is one such technology. It involves a network of banks that are governed by a central body known as a scheme. Two schemes are in operation in the US today, namely The Clearing House (also known as TCH or RTP Network) and the FedNow Service®. Other countries and regions worldwide that support RTP also have at least one scheme.

TCH and the FedNow Service® use a methodology known as Request for Pay (RFP) to secure payments by pulling funds from a payer’s account to pay a merchant or biller. The RFP requires participating banks to obtain the account holder’s express and explicit permission before deducting funds from the user’s account to fulfill a payment. While at first glance, RFP may appear to introduce friction into the payments process, it’s very efficient because banks are required to meet strict SLAs to deliver the RFP promptly to the payer. In addition, the prevalence of multi-factor authentication requirements for access to anything valuable desensitizes the average consumer to being prompted to authorize a real-time payment. The proliferation of mobile devices also makes it more likely that users can be reached via SMS, in-app notifications, or good old emails to authorize the RFP.

RFP eliminates chargebacks by obtaining explicit confirmation that the account holder authorized the transaction, just as PINs in card transactions confirm that the user authorized the transaction. In addition, RFP provides the user with a bit more control over funds that are debited from their bank accounts. This is particularly useful in the fight against the unethical practice of processing subscription payments without the account holder’s knowledge or explicit permission. 

The answer to this question is multifaceted. While adoption of RTP and RFP is growing globally, it is growing more slowly than expected in the US for the following reasons:

1. Financial institution adoption: The first US scheme, TCH, is owned by the top 25 US banks. This has created a more cautious relationship between many non-owner banks and the scheme. The federal government owns the FedNow Service®, and most large banks have not yet implemented or certified for it. This dichotomy is slowing down adoption. In addition, since consumer demand for RFP is not overwhelming, mainly because the public is unaware, most financial institutions have not had to act. Lastly, financial institutions earn considerable compensation from card brands for card transactions, which RFP may not fully offset.
2. Merchant adoption: Merchants have not broadly demanded RFP due to a lack of awareness. In situations where merchants are aware, they are left unconvinced due to the limited number of banks supporting RFP and the perception that savings from card-related payments will be spent on incentivizing their customer base to adopt RFP.
3. Consumer awareness: Most users are unaware that they can securely make payments without a card and be notified by their banks in real time to authorize the payment. One can observe that neither banks nor merchants are prioritizing RFP awareness. However, it is this awareness that will drive RFP growth and enable the ecosystem to evolve away from dependence on cards and other card payment technologies.

As consumers become RFP-aware, new use cases will emerge, and existing ones will be amended to leverage these payment methods. For example, agentic commerce is on the rise. There is really no need for middlemen in agentic commerce if agents can be primed to access account holders’ bank accounts securely. The account holder will have the option to expressly authorize the payment after the commerce agent completes the purchase, or to delegate this responsibility to a trusted agent. From use cases where the account holder is present to others where the account holder is absent, RFP represents the future of payments, even though it is sometimes difficult to see beyond the current dominance of card-based payments.