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What’s the difference between RTP and ACH payments?

What’s the difference between RTP and ACH payments?

When your business needs to send fast payments to vendors, contractors or freelancers, it may be challenging to decide between ACH vs. RTP. Both offer speedy payment settlements, but one may fit your needs better than the other.

Ahead, we break down the differences between RTP and ACH, including the benefits of each option, so you can choose which makes sense for a given B2B payment.

What’s the difference between ACH and RTP?

The biggest difference between ACH and RTP is the processing speed of each payment: RTP processes instantly whereas ACH can take several hours (if SameDay ACH is chosen). With RTP, your recipient receives their payment seconds after you send it.

ACH vs RTP: Differences between both payment options

A few other major differences include:

  • Availability. ACH payments are only available on business days and not the holidays or weekends. RTP transactions are available 24/7 and settle instantly.
  • Transfer type. ACH payments may be used for both credit and debit transfers. RTP is a credit transfer only.
  • Transaction data. For your finance teams, RTP transactions offer more remittance information (140 characters) as opposed to ACH (80 characters).

There are several more differences between ACH and RTP that we’ll discuss below, but first we’ll review each payment separately for a better understanding of why these differences matter.

What is RTP?

Any payment processed in real-time through The RTP® Network is known as RTP or real-time payment. As the name indicates, the transaction is processed the moment the payment is initiated and is delivered directly to your recipient’s bank account. Each transaction is processed individually regardless of time or date, meaning you can send an RTP any time, any day.

Real-time payments aren’t available with all banks, but they are accepted by many financial institutions, including major banks like Bank of America and Wells Fargo. You can find a full list of participating RTP financial institutions here.

You can also process real-time payments through payment processing providers instead of directly through your bank. As RTP grows in popularity, companies are developing the infrastructure to offer their customers real-time payment options, such as Routable for B2B payments.

For personal transactions (also known as peer-to-peer or P2P), there are a handful of payment apps that offer real-time payment options, including PayPal and Zelle.

Many gig economy businesses that pay 1099 workers (freelancers and contractors) also use these P2P apps. Making B2B payments via P2P apps works well when payment volume is low, but the work to process them can get tough for finance teams to manage at scale.

Learn how using a B2B payout platform like Routable can ease mass payouts

Benefits of RTP

The main benefits of RTP transactions are speed, permanence and cost.

Speed. If you want your recipient to access their payment right away, RTP is the fastest option available to make that happen. The next closest option is ACH SameDay, which can take several hours to process. If you’re paying contractors, for example, getting them their money instantly could give you an advantage over your competition who may be offering slower payment options.

Permanence. When an RTP transaction is processed, it is just like handing the recipient the payment in cash. The funds can’t be blocked or stopped. Other payment forms can be canceled hours or even days after the fact, which can leave both parties in a payment limbo.

Cost. RTP can be affordable. There is a small fee associated with individual RTP transactions, generally in the range of a few cents. The exact cost will depend on your bank or the payment provider you’re using: it’s a few cents per transaction for most business transactions and less than a 1.5% transaction fee for personal transactions.

How does RTP work?

After a transaction is started, the entire process then runs through The Clearing House’s RTP rail. This means all parts of the transaction occur within seconds along a single track.

The transaction is initialized and authorized in milliseconds. Funds are checked and then the funds transfer all from account to account with The Clearing House acting as the intermediary.

This whole process occurs faster than it takes you to initialize the transaction. The icing on the cake is that your recipient gets their money almost instantly, which allows you to move forward financially.

Is an RTP a wire transfer?

No, an RTP is not a wire transfer. A real-time payment runs through The Clearing House’s RTP rail. Wire transfers take place directly between two banks. Since banks tend to work at a slower rate than RTPs, a wire transfer can take up to 48 hours for the funds to be available in the recipient’s account.

What is an ACH payment?

Any payment that processes through the Automated Clearing House Network is considered an ACH payment. Payments are collected into batches and processed at regular intervals throughout the banking day (they are not processed individually like real-time payments). The Automated Clearing House Network acts as an intermediary between the bank initiating the payment and the bank receiving the payment.

Examples of payments that use the ACH Network, include direct deposit and IRS payments. ACH is also a popular B2B payment method.

ACH delivery speeds

ACH offers several delivery options and each is priced accordingly:

As mentioned, ACH processes payments in batches five separate times throughout the day and only through banking hours. This means no transfers after hours, on weekends or over holidays.

Are ACH transfers instant?

No, ACH transfers are not instant. While instant ACH processing isn’t available, the closest option is SameDay ACH, which processes by the end of the business day. Same-day transfers are guaranteed by 5 p.m. as long as they’re submitted before the daily cutoff time. See Nacha’s page on SameDay ACH for more information.

Benefits of ACH

When compared to other money transfer options, there are multiple advantages to using ACH transactions, including cost, efficiency and security.

Cost. Many processors charge less than $1 and can sometimes be free.
Efficiency. ACH is a great option for recurring payments and sending payments at scale.
Security. Using bank-level encryption, there’s no need to worry about a data breach.

How does an ACH payment work?

ACH payments run through the Automated Clearing House network. The transactions are governed by Nacha to ensure the same standard regardless of which regional clearing house the transaction is running through.

  • First, you initiate the payment with your bank.
  • Your bank sends the payment request to an ACH operator.
  • The payment is batched and processed through the Automated Clearing House Network.
  • Finally, the money ends at the recipient’s bank.

Learn more about how B2B ACH payments work.  

Real-time payments vs. SameDay ACH

SameDay ACH offers the closest payment speed to RTP, but why would you choose one over the other?

Real-time payments

  • If payment speed is your priority, choose RTP over ACH. RTP pays your recipient in seconds.
  • If you prefer a real-time insight into cash flow, choose RTP over ACH. Real-time payments are processed right away.
  • If you want to strengthen relationships with your vendors, they'll love RTP because they get paid instantly.
  • If late fees are a concern, RTP eliminates the risk of late fee payments since they're processed right away.

SameDay ACH

  • If you don't need payments to process instantly, SameDay ACH processes by end of the business day (as long as the payment is submitted by the noted deadline).
  • If you'd like a little more peace of mind, SameDay ACH can be reversed. RTP payments are final once they are processed.

What to consider when choosing between RTP vs. ACH

Now that we’ve gone over real-time payments vs SameDay ACH, how does RTP stack up against ACH in general? If you feel stuck on whether to choose RTP or ACH payments, it may help to ask yourself these questions:

  • Will I need to reverse my payments at any time? If so, you may want to choose ACH.
  • Is there a benefit for me to send payments that are available in real time? If so, RTP may be the best option to avoid having to hit the cutoff for SameDay ACH.
  • Would I like payments I make to be posted any day, even on weekends? If yes, RTP is the best choice.
  • How much money do I need to send? Both can handle large sums of money, but both have different limits: RTP can process up to $1 million per day in payments. With ACH payments, the limit is $25,000 per transaction.

The choice is really an individual one. Like many businesses, you may use ACH for some transactions and RTP for others. Or you may find that one or the other works best for you across the board. It's also beneficial for your vendors to offer a variety of payment options to fit their preferences.

Send RTP and ACH payments to your vendors and 1099 workers with Routable

Routable offers both automated RTP and ACH transactions so you can pay each vendor and contractor in the way that works best for them while helping your finance team scale more efficiently.

Our software integrates with major accounting programs with a real-time, two-way sync to streamline your day-to-day work and reduce the amount of time you spend reconciling data. We integrate with:

Learn more about how to send mass payouts using RTP and ACH payments with Routable:

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