What is Real-Time Payments?

What Are Real-Time Payments?

Real-time payments -- sometimes called instant payments or immediate payments -- are electronic transfers that move money from one account to another within seconds, any time of day, any day of the year. No waiting for batch processing. No "allow two to three business days." The money arrives in the recipient's account almost as fast as you can send a text message.

In the UK, the Faster Payments Service has been delivering this since 2008, processing payments in seconds around the clock. Globally, similar systems exist in dozens of countries: India's UPI, Brazil's PIX, the EU's SEPA Instant, and the US Federal Reserve's FedNow, among others.

How Real-Time Payments Work

Traditional bank transfers operate on batch processing. Banks collect payment instructions throughout the day and process them together at set times -- typically two or three times per day. This is efficient for banks but means the recipient might wait hours or even days for the funds to arrive, especially over weekends or bank holidays.

Real-time payment systems work differently. Each transaction is processed individually, the moment it is submitted. The process follows a rapid sequence:

• The payer initiates the transfer through their bank or payment app
• The payer's bank validates the instruction and checks for funds
• The payment message is sent to the real-time payment network
• The network routes the message to the recipient's bank
• The recipient's bank credits the funds to the payee's account
• Both parties receive confirmation

The entire process typically takes between two and fifteen seconds. Crucially, the system operates 24/7/365 -- there are no cut-off times, no weekends, and no bank holidays. Money moves whenever people need it to.

Why Real-Time Payments Matter for Businesses

Cash flow is the lifeblood of any business, and real-time payments fundamentally change how cash flow works. When a customer pays, the money is available immediately. There is no float period, no uncertainty about when funds will land, and no anxious checking of bank statements the next morning.

For businesses that operate on thin margins or have high working capital needs, this immediacy is transformative. A tradesperson who completes a job on Friday afternoon can receive payment before the end of the day, rather than waiting until Monday or Tuesday. A small business paying suppliers can make the payment at the last possible moment without risking a late arrival.

Real-time payments also enable new business models. Pay-per-use services, instant refunds, gig economy payments, and on-demand payroll all become practical when money can move in seconds rather than days.

Reduced Risk

Because real-time payments are irrevocable once processed (unlike card payments, which carry chargeback risk), businesses receiving real-time payments have certainty that the funds are theirs. This reduces credit risk and eliminates the cost and administrative burden of managing chargebacks.

Real-Time Payments and Telephone Payments

Real-time payments are changing how telephone payments work, particularly through Open Banking. Instead of taking a card number over the phone, an agent can send a payment request (via SMS or email) during the call. The customer authorises an instant bank transfer on their phone, and the money arrives in the business's account within seconds -- all while the conversation continues.

This approach has several advantages for telephone-based businesses. The payment is confirmed immediately, so the agent can complete the transaction and move on. There are no card numbers to handle, which simplifies PCI compliance. And because real-time bank transfers typically have lower processing fees than card payments, the cost per transaction can be lower too.

For collections and accounts receivable teams, real-time payments remove the ambiguity of "the cheque is in the post." When a customer agrees to pay during a phone call, the payment can be completed and confirmed before the call ends. There is no gap between promise and delivery.

Practical Considerations

While real-time payments offer clear benefits, businesses need to adapt their processes. When money moves in seconds, reconciliation needs to happen in near-real-time too. Traditional end-of-day batch reconciliation processes may not be sufficient for businesses handling high volumes of instant payments.

Fraud prevention also requires a different approach. With batch processing, there is a window of time to review and potentially stop suspicious transactions. With real-time payments, that window essentially disappears. Businesses and payment providers need robust pre-transaction checks and AI-driven fraud detection that can make decisions in milliseconds.

Not all customers are set up for real-time payments. While Faster Payments is widely supported in the UK, some accounts (particularly certain business accounts and building society accounts) may not be connected to the network. Businesses should offer real-time payments as an option alongside traditional card payments rather than as a replacement.

Global Adoption

Real-time payment systems are becoming the global standard. India's UPI processes billions of transactions per month. Brazil's PIX, launched in 2020, was adopted by over 100 million users within two years. The EU's SEPA Instant covers most eurozone countries. The US launched FedNow in 2023 after years of relying on batch-processed ACH transfers.

For UK businesses with international customers or suppliers, this global expansion of real-time payments opens new possibilities. As interoperability between national real-time systems improves, cross-border instant payments will become increasingly practical, potentially transforming international trade settlement in the same way that Faster Payments transformed domestic UK transfers.