With the long-awaited launch of FedNow just a few months away, you are hearing the terms faster payments, real-time payments, instant payments, and emerging payments more than ever before. But are we all on the same page as to what these terms mean? A quick search of industry resources will show you that the variances in usage can be confusing.
Recognizing the value of standardizing the definitions we use in our education programs, ePayResources has adopted the definitions outlined below. Our foundation is the Faster Payments Council’s definition of faster payments and definitions from the Federal Reserve that we presented in our Faster Payments Town Hall this spring.
Faster payments: Payments in which the transmission of the payment message and the availability of final funds to the payee occur in real time or near-real time on as near to a 24-hour and seven-day (24/7) basis as possible. Faster payments could have deferred or instant/real-time settlement.
Instant or real-time payments: A type of faster payment where the transfer of final funds between the payer’s and payee’s financial institutions occurs with the transmission of the payment message and just before the payee’s financial institution makes the payment available to the payee. Instant payments and real-time payments are synonymous, as they are defined based on settlement. Examples of instant or real-time payments are RTP, FedNow, and Zelle.
Examples of faster payments that are not instant or real-time payments because they have deferred settlement are Venmo and PayPal.
Emerging payments: New payment rails, types, and solutions just entering the market. Examples are Central Bank Digital Currency and FedNow. Based on adoption velocity, ePayResources will likely continue to classify FedNow as an emerging payment rail through the end of this year.
Do you have questions about faster, instant, real-time, or emerging payments? Ask ePayResources on the Payments Answerline™ at 800-475-0585, Option 1.