Real-Time Payments: How RTP and FedNow Actually Differ from ACH

The Expedited Funds Availability Act, passed in 1987, requires the Federal Reserve to make deposited funds available to consumers as fast as technology allows. Since then, the Fed has changed the hold time zero times.

Mexico got real-time payments in 2004. The UK in 2008. Brazil in 2020. The US launched FedNow in July 2023, and as of Q1 2026, fewer than one in five American financial institutions have joined. Most of those are receive-only. They can accept an instant payment. They cannot send one.

The technology exists. Two separate instant payment rails are live in the United States right now. The question of why most Americans still can't use them has less to do with engineering and more to do with who benefits from slow money.

How ACH actually works

ACH is a batch system. Transactions pile up, get bundled into files, and settle in scheduled windows. Aaron Klein at the Brookings Institution uses a laundry machine analogy: you pile up dirty clothes, run the machine, and everything comes out clean at once. Real-time payments wash each item individually.

The Fed runs ACH processing windows on Eastern Time. The cutoff is 5pm in New York, which is 2pm in California and 9am in Hawaii. Miss the window, and your payment sits until the next one. Miss Friday's last window, and it waits until Monday. If Monday is a holiday, it waits until Tuesday.

Same-day ACH added three intraday settlement windows, but "same-day" only means same business day if you hit the cutoff. A payment submitted at 5:01pm ET on a Friday settles Tuesday at the earliest. The word "same-day" is doing a lot of work.

ACH also allows returns. A settled payment can be reversed up to two business days later for most reasons, or 60 calendar days for unauthorized debits. The money arrives, but it's provisional. You can't treat it as final until the return window closes.

RTP: the private rail

The Clearing House, a consortium owned by the largest US commercial banks, launched RTP in 2017. It was the first real-time payment system in the United States.

RTP settles in seconds, 24 hours a day, 365 days a year. Christmas morning, 2am on a Sunday, during a federal holiday when ACH is closed. The payment is irrevocable the moment the receiver's bank confirms it. There is no return mechanism, no chargeback, and no way to claw it back through the system.

The current per-transaction limit is $10 million, raised from $1 million in 2024. In Q1 2026, the network processed $481 billion in payments. Average transaction size jumped from $842 in January 2025 to over $4,000 as the higher limit attracted business payments.

RTP is push-only. The sender initiates and pushes funds to the receiver. There is no debit capability, which eliminates the entire class of unauthorized-pull risks that plague ACH. But it means the sender must actively participate in every payment.

753 banks and 440 credit unions participate. That's broader than FedNow but still a fraction of the roughly 8,700 financial institutions in the US.

FedNow: the public rail

FedNow launched in July 2023. It is operated by the Federal Reserve and offers the same core capability as RTP: instant, irrevocable, 24/7/365 credit transfers.

The per-transaction limit is $500,000, half of RTP's pre-2024 limit and a twentieth of its current one. As of Q1 2026, 1,725 institutions have joined, representing 19.7% of US financial institutions. Small and mid-size banks and credit unions make up more than 95% of participants.

But participation does not mean full participation. Most FedNow institutions are receive-only. They can accept an incoming instant payment. They cannot originate one. The bank can catch the ball but not throw it.

The difference matters for consumers. If your bank is receive-only on FedNow, your employer could pay you instantly through FedNow, but you cannot send an instant payment to your landlord through the same system.

Why they look the same but aren't

RTP and FedNow both settle instantly, both run 24/7, and both are push-only credit systems. The differences are structural.

Operator. RTP is operated by The Clearing House, which is owned by the largest commercial banks. FedNow is operated by the Federal Reserve. This matters because access to RTP requires a relationship with TCH, while any institution with a Fed master account can join FedNow. Community banks and credit unions are more likely to start with FedNow because the onboarding path is simpler.

Limits. RTP allows $10 million per transaction. FedNow allows $500,000. For consumer payments, this difference is irrelevant. For business payments, treasury operations, and real estate closings, it determines which rail you can use.

Overlap. 532 banks and 305 credit unions participate in both networks. For those institutions, routing decisions between RTP and FedNow become an engineering problem: which rail has the receiver's bank, which is cheaper, which has better uptime for a given corridor.

Request for Payment. Both networks support Request for Payment, which adds pull-like semantics to the push-only model. A biller sends a request, the payer's bank presents it, the payer approves, and the payment flows. This is the mechanism that could replace direct debit for recurring bills, but adoption has been slow because both the biller's bank and the payer's bank must support it.

The policy gap

The technology works. Both rails can settle a payment in seconds at any hour on any day. The constraint is adoption, and adoption is a policy choice.

Senator John Fetterman asked the Federal Reserve how much banks charge consumers to use FedNow. The Fed said it didn't know. Fetterman asked why they don't find out. The Fed said it didn't want to know.

FedNow was designed so that consumers cannot request it. There is no mechanism for a customer to walk into a bank and say "send this payment via FedNow." The bank decides which rail to use, and most banks have no incentive to choose the instant option when the slow option is more profitable.

Slow money generates revenue. Every day a deposit is held before funds are made available, the bank earns float on that money. Overdraft fees, which generated tens of billions in annual revenue across the banking industry, are directly linked to funds availability timing. If every direct deposit arrived instantly instead of sitting in the ACH batch cycle for one to three days, a significant portion of overdraft events would never occur.

Klein's research at Brookings estimates that slow payments have extracted over $100 billion in wealth from Americans living paycheck to paycheck, transferred to banks, payday lenders, and check cashers through overdraft fees, late fees, and the cost of alternative financial services that exist primarily because the banking system is slow.

The Expedited Funds Availability Act requires the Fed to act. The Fed has chosen not to, for 37 years. The rails are built. The switches are live. The policy question is whether the institutions that profit from delay will be required to flip them on.