Real time payments vs ACH: Key differences

How RTP works behind the scenes

Multiple steps take place within seconds.

• The payor initiates a payment.
• The RTP network receives the payment request, processes it, checks it for fraud, and transfers it to the receiver’s financial institution.
• The receiving institution checks that the payment is legit.
• The receiver gets the money in her or his account.

Is ACH the same as TCH?

As mentioned above ACH stands for the Automated Clearing House network, which is regulated and governed by NACHA, a nonprofit organization.

There’s no real difference between ACH and TCH because TCH—The Clearing House Payments Company—is a form of ACH. It’s a private association that’s owned by the biggest 20 commercial banks in the world. Estimates say it’s in charge of about half of commercial ACH payment processing volume in the US.

The other half is managed by the Federal Reserve and Electronic Payments Network (EPN).

Speed and timeliness

Let’s start with figuring out which option supports your business operations and logistics best.

• RTP happens within seconds, whether it’s a business day, a holiday or a weekend.
• ACH payments take one to three days. Payments pass through the Automated Clearing House first, and are transferred in bulk to receivers. You can pay extra to get the money fully transferred to the receiving account on the same day. But are ACH payments instant too? Yes, third party platforms, like Melio, make the ACH real time option a reality.

Cost and fees

While there are other considerations, keeping your budget in mind is critical, especially if you make a lot of payments. So let’s compare RTP vs. same day ACH rates.

• RTP payments cost $0.25-$1 each.
• A standard ACH transfer costs a few cents to $6 (or you can get it for free with Melio). Same day ACH payments cost $10-30 each.

Security and fraud prevention

Both options don’t involve exchanging credit card information or risking checks getting stolen, so there’s an element of added security with both. But what else?

• RTP is completed instantly, but it’s usually done by innovative technology, including AI algorithms that analyze transactions in real time. These systems can often stop suspicious transactions, or at least alarm the relevant parties.
• ACH takes a few days—or a few hours with same day ACH—to complete a payment transfer. Therefore, you have time to review the transaction and ensure all is good. ACH debits (or withdrawals) present an extra risk, because payors give recipients permission to take money out of their account. It’s important to only allow this to trusted parties, and to continue monitoring transactions.

Reach and availability

Both RTP and ACH can technically be done all across the world, but one is likelier to be available internationally.

• RTP can be made internationally 24/7, including weekends and holidays.
• ACH can technically be transferred outside the United States, but not all banks support international ACH payments yet. This makes ACH less reliable as a consistent option across your international client or vendor base. Even locally, ACH payments aren’t completed on weekends and federal holidays.

RTP advantages

• RTP means recipients get their money instantly. Hence, businesses can keep money on hand longer. Tthey can make a payment last minute without actually being late for their vendor’s deadline.
• RTP can be transferred internationally 24/7, including on weekends and holidays. While we hope you get to rest on weekends and holidays, we know sometimes it’s necessary to work, and this allows greater flexibility.
• Both payor and recipient can include and share comments about the transaction, making it easier to reconcile.

RTP disadvantages

• The biggest advantage of RTP is also its disadvantage—he fact that it’s instant. If you make any mistakes (say, list the wrong amount or the wrong account number), you’ll only be able to catch them after the recipient has received the funds. Fixing these mistakes can sometimes be very time consuming, and there could be times when errors can’t be fixed at all.
• Similarly, RTP reduces human error, but it relies exclusively on automatic, AI-based software to detect potential fraud within the few moments it takes to complete the payment transfer. This is very advanced technology that can likely accomplish more and detect easily skippable signs by those who can’t instantly analyze mountains of data. However, some might claim that the lack of human supervision on the funds as they’re being processed is a disadvantage.

ACH advantages

• ACH payments take several days to be fully completed. That gives you plenty of time to review transactions and verify everything’s legit. If you made a mistake, there’s time to stop the transaction, so you don’t pay a sum with an extra zero, or make a payment to the wrong entity with a very similar account number to your vendor’s account.
• There’s also more bandwidth to ensure security and compliance thanks to the gap between making and receiving the payment.
• If you need instant ACH payments instead, platforms like Melio can help you use those with easey.
• ACH can be used for recurring payments. With ACH withdrawals, you give your receiver permission to take the money from your account without asking you each time, or requiring further action on your end. This is available whether the sum is consistent (as in the case of subscriptions) or not (say, your water bill). Assuming it’s a trusted entity, you get to take one thing (or a few) off your to-do list.

ACH disadvantages

• Ordinary ACH transfers can take several days to be completed. You can pay extra to get money paid the same day, but it’s more expensive.
• ACH can be transferred internationally, but it might not always be available in countries you need, as not all banks support it. Plus, ACH can’t be transferred on federal holidays and weekends.
• ACH withdrawals are great as long as they work. The challenge is that you’re giving another business or person permission to withdraw money from your account, and tha