When it comes to making payments, there are various methods available in the market. Three of the most popular ones are Real-Time Payments, Faster Payments and ACH/EFT Transfers. While they serve the same purpose, there are significant differences in how they work.
Real-Time Payments (RTP) are electronic payments that are processed instantly and should be available 24x7x365, meaning you can send and receive the payment at any time. Unlike traditional payment methods that can take days or even weeks to complete, RTPs happen in real-time, hence the name. RTPs are ideal for businesses that require quick and secure payment processing.
To disburse payments using RTP, the sender initiates the payment, and the payment is immediately processed. The sender's account is debited, and the receiver's account is credited almost instantaneously. Some examples of RTP solutions are Visa Direct and Mastercard Send.
There are payment methods which are not real-time payments, but they are faster than more traditional payment methods. Faster payments may settle faster, such as Nacha’s same day ACH transfer, but the settlement is not immediate. This is a good option when the payment needs to be completed quickly, but it doesn’t need to be made in real time.
ACH and EFT Transfers
ACH (Automated Clearing House) and EFT (Electronic Funds Transfer) transfers are electronic payment methods that involve the transfer of funds from one bank account to another. While they are not as fast as RTPs, they are still quicker and more secure than traditional payment methods like checks.
To disburse payments using ACH or EFT transfers, the sender must first obtain the receiver's bank account details, including the routing and account number. The sender then initiates the payment using their bank's online portal or mobile app. The payment is processed through the ACH or EFT network and can take up to three days to settle.
Payment disbursement works differently for Real-Time Payments, Faster Payments and ACH/EFT Transfers. RTPs and Faster Payments are ideal for businesses that require fast payment processing, while ACH/EFT transfers are suitable for businesses that can wait for a few days for the payment to settle. Understanding the differences between these payment methods can help businesses choose the one that best fits their needs.