What are Real-Time Payments and How Can I Get Them?

Introduction to Real-Time Payments Remember the days when birthdays meant getting checks from relatives? You'd head to the bank, deposit that $20 check from crazy Aunt Suzie, and wait days for the funds to clear before hitting the mall. In other parts of the world, though, real-time payments were already a thing. Kids there didn’t have to wait forever for a birthday check to clear—money was available instantly (and by instantly I mean near-real time--semantics, am I right?). Okay, maybe not kids per se, but international businesses were definitely enjoying the perks. So, let's dive into what real-time payments are and how they work.

What Are Real-Time Payments? Japan's Zengin system started real-time processing in 1973, going 24/7 in 2018. Switzerland followed in 1987, and many other countries joined the real-time revolution in the 21st century. Wild, right?

Real-Time Payments (RTP) allow money to be transferred electronically between banks instantly (again, take instantly with a grain of salt), any time of day, 365 days a year. Imagine getting cash in your account at the click of a button. This speed is vital for businesses involved in international operations, where traditional banking methods can take days. RTP enhances clarity and trust in transactions, helping consumers, banks, and businesses manage their finances effectively.  A global RTP network operates outside traditional Swift rails.

Why Do We Need Real-Time Payments? Even in 2024, checks take time to clear, and carrying large amounts of cash isn’t safe. Plus, we all want to trace our funds—no dirty money here! For people and small businesses needing cash flow, immediate access to funds is crucial, especially with rising inflation and housing costs.

Do I Have Access to Real-Time Payments? India, Brazil, China, Thailand, and South Korea are leading the pack in real-time payments. So, where does the U.S. fit in? We’re a bit behind, sitting at 33rd globally for real-time payment transactions per month. While The Clearing House, a group of commercial banks, has been running a real-time payments network, the U.S. Federal Reserve recently jumped into the game with its FedNow service—the first new payment rail in the U.S. in 40 years! The best part? Any federally insured bank can join the RTP network; they don't have to be a Clearing House member.

How Does Routefusion Come into Play with Real-Time Payments? Here at Routefusion, we get a lot of inquiries about RTP, specifically if we offer in-house RTP via the Routefusion API. And we absolutely do!  But first, let's see what it takes to offer RTP without Routefusion:

1. Open Accounts: Set up accounts at institutions in different countries.
2. Maintain Reserves: Keep a reserve of funds (float) in these accounts.
3. Manage Payments: When a customer wants to transfer money from USD to MXN, you move funds between your existing accounts instead of initiating a new cross-border payment. You set your exchange rate, accept funds in your USD account, and pay out in MXN using your Mexican account via the local SPEI network.

Challenges to Consider

• Capital: Do you have enough working capital for float reserves?
• Currency Risk: How will you hedge against currency volatility?
• Expertise: Do you have the staff to open and manage international bank accounts?
• Technical Integration: You'll need engineers to integrate various banking systems.
• Manual Processing: Without integrations, staff will need to manually handle payments.

Advantages of Building an In-House RTP System 

• Control Over Exchange Rates: Set your own rates and customer pricing.
• Visibility and Control: Gain more insight and control over transactions.
• Instant-ish Payouts: Pay out funds instantly or as needed based on your risk level.

How Routefusion Simplifies the Process What if all you had to worry about was the capital? With Routefusion’s APIs, everything else is taken care of for you! While we're still expanding our network, we currently support account openings in Mexico, Brazil, Colombia, Argentina, Europe, the UK, and the US.  Routefusion offers a centralized platform that supports multiple currencies, streamlining international transactions, and eliminating the need for multiple bank accounts.

‍How It Works

• Open Accounts: We'll help you open accounts in the supported countries.
• Manage via API/Dashboard: Use Routefusion's API or dashboard to manage everything.
• Webhooks: Get notifications when funds hit the receiving bank account, triggering a payment via the delivery bank account.
• Hedging Strategy: Our team can help you develop a strategy to manage currency risk.

In just a few weeks, you can have your own RTP network up and running with a single integration on our unified API.

Interested?  Reach out to us! We've implemented this for several well-known global companies. Let Routefusion make building your RTP network simple and efficient.