Real-Time Payments vs ACH: Which should your business use? | Plaid (2024)

FAQs

Real-Time Payments vs ACH: Which should your business use? | Plaid? ›

ACH is generally more accessible than RTP because it is accepted in more places, including for online store purchases, bill payments, and direct deposits. ACH payments are also more generally available to individuals and businesses, making it a widely accessible option for a variety of use cases.

RTP (Real-Time Payments), allows users to initiate, send, and receive payments instantaneously, 24/7 and 365 days a year. ACH transactions are much slower than real-time payments, often taking between 2-3 business days for payments to complete.

Lower processing and transaction costs: Considering that businesses can spend up to $20 for a paper transaction – including preparing, printing, mailing, and tracking – processing payments through ACH can reduce transaction costs significantly.

Disadvantages of the ACH system

They usually don't support instant or same-day payments and processing. Because clearinghouses have specific times when they send requests to ACH operators, individuals may not be able to make payments after the scheduled time has elapsed.

While RTP has many advantages, there are a few potential drawbacks. Being irreversible provides greater peace of mind for the seller but removes the buyer's ability to reclaim funds for legitimate disputes. Adoption and interoperability are also limited.

The benefits of real-time payments go beyond speed – to precision, transparency and certainty. Real-time payments will continue to capture a greater share of treasury payments as more firms evolve and grow their back-office systems and processes.

An ACH transaction involves the transfer of funds between banks, credit unions, or other financial institutions through an electronic network. This type of transfer is used for many purposes, including processing: Paycheck direct deposit. Direct deposit of government benefits or tax refunds.

ACH payments are a type of electronic fund transfer that allows businesses to send and receive payments securely and quickly. This means that businesses can enjoy faster processing times, increased security, lower costs, and better record-keeping.

Why do we still use ACH? ›

The Automated Clearing House (ACH) facilitates transfers between banks. This eliminates the need to withdraw money from one account and deposit it into another. The network is updated to allow businesses and individuals to execute transactions on the same day.

Are ACH transfers reported to the IRS? The IRS doesn't count ACH transfers as cash, so they are not reported.

The maximum ACH transfer limit can be as high as $25,000 per day, depending on your financial institution. For example, JPMorgan Chase offers $25,000 daily for personal accounts.

When transmitting an RTP stream over TCP, the data must be packetized and framed in such a way that it can be transmitted over the TCP connection. This additional overhead can increase the size of the packets and reduce the overall efficiency of the transmission.

RTP delivers an instant experience for your customers, who can access their funds within seconds. Beyond the obvious advantages of a real-time payment experience, other benefits of using RTP include the fixed cost per transaction and the flexibility in requiring minimal Personal Identifiable Information (PII).

Though the RTP Network limit for a transaction is $1,000,000, your individual bank or financial institution may have its own transaction limits which could be lower.

The RTP network is open to all federally insured U.S. depository institutions.

Real-Time Payments (RTP) are account-to-account transactions that clear and settle near instantaneously via the RTP® Network. RTP transactions are credit-only transfers that support extensive remittance data that can be used to easily reconcile funds. Payments cannot be debited or “pulled” via RTP.

ACH stands for Automated Clearing House, a U.S. financial network used for electronic payments and money transfers. Also known as “direct payments,” ACH payments are a way to transfer money from one bank account to another without using paper checks, credit card networks, wire transfers, or cash.

Real-time payments are instant payments that are processed immediately and continuously, 24/7. Unlike traditional payment systems, which can take hours or even days to complete transactions, RTP systems immediately transfer funds from one bank account to another.