COMMENTARY: Real-Time Funding Improves the Digital Wallet Experience. Here’s How

Digital wallets such as PayPal, Venmo, Apple Pay, and Google Pay are ubiquitous components of everyday financial activity for millions of people. With users increasingly using and maintaining cash balances on digital wallets, they are starting to demand 24/7 access to their money. They also expect faster and more visible transfers between their wallet and bank.

There’s a way for today’s digital wallets and financial institutions to move money in real time, 24 hours a day: the RTP Network, the instant payments network Introduced in 2017. The RTP network has achieved significant growth. In the fourth quarter of 2023, the network facilitated 74 million transactions for $39 billion, representing 15% volume growth and a 14% value increase over the third quarter.

Let’s look at a few ways that real-time funding can improve the customer experience with digital wallets.

The payments industry is upgrading the infrastructure, or “payment rails,” that moves money between banks. Most people are familiar with traditional electronic payments that normally clear and settle in one to three days over the automated clearing house (ACH) network. ACH payments are a popular way for many banking customers to pay bills and get paid—in fact, 94% of Americans receive their paychecks via ACH direct deposit.

However, the ACH network was set up 50 years ago. It was built for batch-based processing, which often does not meet the expectations that consumers and businesses have for instant capabilities. The ACH network is also limited to settling payments four times a day, and only when the Fed’s settlement service is open. That means no ACH transactions on nights, weekends, or federal holidays.

The RTP network, an instant-payments system, can provide instant transfers and more flexible access to the funds in a person’s bank account 24 hours a day, seven days a week.

The RTP network is not just about offering “faster ACH.” Instead, its modern structure opens new capabilities for payments innovation. Here are a few of the biggest benefits the network offers to digital-wallet users and banking customers:

Immediate Access to Money

People do not want to wait one to three days for an ACH transfer to clear. Real-time payments make it possible for money to move to an individual’s bank account instantly.

24/7 Transaction Processing

With digital banking apps and digital wallets, no one makes payments only during “bankers’ hours” anymore. If you want to do business, shop, or conduct other transactions, you want to do it right now. The RTP network lets people move money any time of day, seven days a week.

Finality of Settlement

RTP network payments settle in seconds. The funds are available immediately as “good and final funds” that are ready to use, and the customer sees the transaction happen with complete transparency from end to end.

In sum, real-time payments help digital-wallet customers move money to their bank account as fast as possible. This makes it easier, for example, to move funds from the winnings in an online gaming wallet to buy groceries. Real-time payments help people move money where and when they need it.

The RTP network is the first new payment rail in the United States since the launch of the ACH in the 1970s. Real-time payments can drive additional innovation and new products. By making it easier for customers to move money anytime, anywhere, digital wallets and financial institutions can create a more vibrant ecosystem for product innovation.

—Jim Colassano is senior vice president of product development at The Clearing House.