One of the most buzzed about trends in the payments industry is the rise of real-time and faster payment options. In recent years, more and more consumers and businesses have used novel payment methods to send and receive money faster than traditional payment options have allowed. Interest in real-time and faster payments grew further when the Federal Reserve announced last summer that it was developing FedNow, a real-time payment rail to provide an alternative to The Clearing House’s (TCH) RTP rail.

Despite all the news about faster and real-time payment methods, there is a lot of confusion on the topic. While many use the terms interchangeably, there are different payment types across the spectrum. Moreover, many people are unsure of how common faster and real-time payments are, or even what the use cases consist of. Finally, banks and other financial institutions are often unsure of how to approach using these emerging solutions.

To help the public better understand faster and real-time payments, PaymentsJournal sat down for a discussion with Sarah Grotta and Steve Murphy, two experts from Mercator Advisory Group. Grotta is the director of Mercator’s Debit and Alternative Products Advisory Service and Murphy is the director of Mercator’s Commercial and Enterprise Payments Advisory Service.

PaymentsJournalThe Distinctions Between Faster Payments and Real-Time PaymentsPaymentsJournal The Distinctions Between Faster Payments and Real-Time PaymentsPaymentsJournaljQuery(document).ready(function ($){var settings_ap32424983 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"32424983",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_91465_2",settings_ap32424983); }catch(err){ console.warn("cannot init player", err); } });

During the conversation, Grotta and Murphy discussed the difference between faster and real-time payments, the state of real-time payments in the U.S. by use case, and how banks should be approaching these payment methods.

Confusion in the market and the need for clarification: Faster payments vs. real-time payments

Faster payments or Real-time payments?

“Many in the industry will use the terms faster and real time fairly interchangeably, and certainly I’m guilty of that,” said Grotta. “But I think that really just points to a bit of the confusion in the market and the need for clarification.”

Put simply, real-time payments are not the same as faster payments, but they are similar. According to Grotta, the best definition of faster payments is laid out by the Federal Reserve’s Faster Payments Task Force.

According to the task force’s definition, a faster payment solution is “a ubiquitous, safe, faster electronic solution for making a broad variety of business and personal payments, supported by a flexible and cost effective means for payment clearing and settlement groups to...