This guide walks through what RTP means in the UK, how it works, its advantages and risks, and what the future could look like as cross-border instant payments become a reality.
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In business, time really is money, and in the world of time, real-time is the quickest time possible. That's because when things are happening in real time, they are happening RIGHT NOW. Waiting days for supplier payments to clear, or kicking the can on a refund until funds arrive, can cause frustration on both sides of a transaction. Enter real-time payments (RTP), a payment system that settles money transfers almost instantly, giving businesses more control, customers more confidence, and suppliers faster access to working capital.
Real-time payments (RTP) are bank-to-bank transfers that move money and confirm settlement within seconds, at any time of day or week. Unlike older, previously used systems such as BACS, which can take three working days, RTP is designed for the modern economy where businesses can’t afford to wait days for payments to clear. The UK has multiple ways to channel money, which all move at different speeds. Traditional methods like BACS and card networks can take days to settle, while CHAPS offers same-day transfers at a higher cost. Unlike these slower methods, real-time payments (RTP) stand out by completing transfers in just seconds, as shown below.
The UK has been a pioneer in real-time payments since the launch of the Faster Payments Service (FPS) in 2008. The Faster Payments was created to move away from the cumbersome behemoth that is traditional banking and create a modern, always-on payment system. Today, the FPS underpins most real-time bank transfers in the UK, serving both individuals and businesses.
Unlike BACS (which can take three working days) or CHAPS (which is same-day but comes with high fees and cut-off times), Faster Payments was built for speed, accessibility, and affordability. UK businesses can send and receive money instantly without being constrained by the working week or bank holidays.
Even though real-time payments feel like they are happening in real-time with the user, there are several important steps that need to happen first that are so quick, the user doesn't notice.
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For many small and medium-sized businesses, cash flow, happy customers, and the trust of suppliers can make or break growth prospects. Otherwise, you might need to hide behind your desk while various angry business associates and customers bang on your door. Real-time payments drastically improve all three of these by ensuring that the money arrives in seconds, which eliminates the uncertainty of those transactions deemed 'pending'. Some of the most important benefits of adopting real-time payments for businesses in the UK are as follows:
Cash flow is king, and one of the biggest benefits of RTP is a stronger and more reliable cash flow. Instead of waiting anxiously for sales revenue to clear, businesses can use this money immediately for whatever they deem the most necessary and critical for the business, such as getting more customers. This means payroll will be met, and those line items that need some investment can receive money. For example, a freelancer who has a small photo business and gets paid through Faster Payments can avoid dipping into an overdraft just to cover rent.
Speed also builds confidence with customers, and this is especially important when issuing any type of refund. When refunds arrive in seconds, buyers feel reassured and are more likely to come back, as they know you "have their back". An online store that processes returns this quickly not only avoids complaints but also strengthens loyalty.
Suppliers need to be leveraged, and being able to settle invoices immediately gives SMEs more bargaining power. If a supplier can count on being paid immediately, they might be willing to move on the price, terms, and general negotiation. Suppliers often reward fast payers with discounts or better terms. A restaurant, for instance, that pays its produce vendor on the spot may secure lower prices on future orders. Stronger supplier relationships can also mean priority access to stock during busy periods.
RTP saves time for finance teams by eliminating all of the headaches that come with payment delays. With fewer delays in settlement, there is less manual chasing of payments and fewer reconciliation hiccups. An accounting team that no longer spends hours untangling late transactions can focus on forecasting and growth.
While real-time payments give businesses speed and certainty, those same qualities can also manifest themselves as challenges. The overarching concern is fraud, since instant and irreversible transfers leave little room for error correction if a payment goes to the wrong account. Integration costs can also cause issues, as some companies may need to upgrade banking or ERP systems to fully support RTP. Below are some of the challenges posed by real-time payments.
Real-time payments can transform how small businesses manage money, serve customers, and work with suppliers. But speed and certainty also come with possible drawbacks.
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The next stage of evolution for the UK’s payment system is the New Payments Architecture (NPA), which will eventually replace Faster Payments. This payment system has evolved to provide a more resilient, flexible, and data-rich framework for processing real-time payments. It aims to standardize payment messaging while incorporating advanced fraud prevention tools. This is important because, as mentioned above, the most overarching concern with real-time payments is fraud. The NPA will make it easier for banks, fintechs, and businesses to innovate on top of the infrastructure as well, meaning we could see this getting more personalized depending on the business.
Real-time payments aren't just limited to the UK; they are a technology being embraced by everyone, from the bustling hawker stalls in Newton Market, Singapore, to the ski resorts in Denver, Colorado. Many countries and regions are adopting their own versions of real-time payments, and naming them differnet things, just like the UK's FPS. Below are some of the new real-time payment systems most talked about.
One of the issues with global trade is the rigidity of the financial system and how complex it can be to facilitate cross-border payments. Currently, international transfers are often slow, expensive, and opaque, taking two to five working days and involving multiple intermediaries. By linking domestic real-time systems, businesses could eventually send and receive international payments as quickly as they move money domestically.
For SMEs that do business overseas, this is an absolute game-changer. It could reduce foreign exchange (FX) exposure, cut transaction fees, and create greater certainty for supply chains.
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