Real-Time Payments vs. Good Funds Payments
Are Real-Time Instant settlement Payments Good Funds?
A lot of confusion exists in whether a real-time instant payment method is final and irrevocable, aka:
Good Funds, is defined simply as: Immediately settled funds in a bank account that are irrevocable, intra-bank and/or interbank account-to-account (A2A) transfers and instantly usable by the owner of the account. Most Good Funds transactions are "Credit Push" versus "Debit Pull."
Instant payments are defined as electronic payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and simultaneous debiting of the payer’s account and crediting of the payee’s account (within seconds of payment initiation) in a synchronous transaction, irrespective of the underlying payments instrument used (credit transfer, direct debit) and of the underlying clearing and settlement arrangements that make this possible. In addition to payment assurance and lower fees for transactions, many small businesses and large retailers alike are looking at instant payments to enhance their cash flow management, reduce fraud activity and provide incremental value to their customers.
Regardless of instant settlement features, Credit and Debit Card transactions and Same-Day ACH transactions are not irrevocable and are subject to Charge-back and Revocations. Real-Time Credit Card Payments and Same-Day ACH, although having the feature of instant settlement upon batching are not Final and Irrevocable.
~ The NACHA Operating Rules dictate bank-to-bank rights and responsibilities for ACH payments. The ACH Network is a batch processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing. NACHA requires the use of Standard Entry Class Codes ("SEC Codes") for each transaction settled, both one-time and recurring, through the ACH. Each code identifies what type of transaction occurred to create the item. In addition to NACHA’s Operating Rules, transactions are also primarily governed pursuant to Regulation E and UCC 4A (as codified by each state).
~ Regulation E - Issued by the Federal Reserve Bank pursuant to the Electronic Funds Transfer Act (EFTA), pertains to ACH.
Wires and Payment Orders:
~ Article 4A of the Uniform Commercial Code (UCC) applies to applies to credit funds transfers only. Evolution of U.C.C. Article 4A
Wires & Payment Orders are subject to UCC 4A
U.C.C. - ARTICLE 4A - FUNDS TRANSFER
- PART 1. SUBJECT MATTER AND DEFINITIONS
- PART 2. ISSUE AND ACCEPTANCE OF PAYMENT ORDER
- PART 3. EXECUTION OF SENDER'S PAYMENT ORDER BY RECEIVING BANK
- PART 4. PAYMENT
- PART 5. MISCELLANEOUS PROVISIONS
U.C.C. 4A-103 ("Payment order" means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if: (i) the instruction does not state a condition to payment to the beneficiary other than time of payment; (ii) the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and (iii) the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank."
FINALITY OF PAYMENT FOR CREDIT TRANSFERS - PAYMENT FINALITY AND DISCHARGE IN FUNDS TRANSFERS: See http://scholarship.kentlaw.iit.edu/cgi/viewcontent.cgi?article=3669&context=cklawreview see pages 633-675
Are FedNow & The Clearing House Real-Time Payments Good Funds?
In a business-to-business context, both FedNow and RTP offered by The Clearing House (TCH) is a credit “push”
system. Payments are pushed from the bank account of the
business making the payment to the bank account of the company
receiving it. In between, both platforms support the financial
institution’s customer-facing systems for services like bill
payment, cash management, peer-to-peer (P2P) payments, and
emergency disbursements. Messages such as request to pay, requests for payment,
payment confirmations, requests for additional information, and
remittance detail are used to create frictionless
customer-facing interactions. TCH's system
is the only privately owned Real-Time Payment "Rail" that can
reach all U.S. bank and credit union accounts and enable funds
to be sent and received within seconds. All FedNow & TCH Real-Time payments are "Credit
Push" instead of "Debit Pull."
Real-Time Payments via The FedNow Service by the United State Federal Reserve are GOOD FUNDS!
Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the
FedNow ® Service, to support faster payments in the United States. What are FedNow Real-Time payments: FedNow - Federal Reserve Real-time Payments
The Federal Reserve's FedNow Service will be the second system (see The Clearing House RTP) offering Real-Time Payment "Rail" that can reach all U.S. bank and credit union accounts and enable funds to be sent and received within seconds.
The FedNow Service enables Participants to initiate credit transfers, receive final and irrevocable
settlement for credit transfers, and make available to Receivers funds associated with such
credit transfers in real-time, twenty-four (24) hours a day, seven (7) days a week, fifty-two (52) weeks a year.
Real-Time Payments via The Clearing House are GOOD FUNDS! The RTP® (Real-Time Payment) network, the real-time payments system from The Clearing House, is the first new core payments infrastructure in the U.S. in more than 40 years. RTP® is not Real-Time ACH. The RTP System enables Participants to initiate credit transfers, receive final and irrevocable settlement for credit transfers, and make available to Receivers funds associated with such credit transfers in real-time, twenty-four (24) hours a day, seven (7) days a week, fifty-two (52) weeks a year.
Features & Benefits
FedNow & TCH Real-Time payments have benefits for all parties involved in Financial Transactions.
Benefits to your company include:
- Money Transfer: Current limit of $100,000 per transaction.
- It's Fast: 24/7/365 access to funds anytime vs. several days for paper checks or ACH transfers to process.
- It's Final: Because FedNow & TCH say so. All RTP are Final & Irrevocable.
- Software Integration: Integrate your Management or Enterprise software with us.
- Message Detail: Full 145 characters available using ISO 20022 XML format.
- Online Down Payments: Don't use inconvenient and expensive Wires & Cashier's Checks.
- Online Real-Time Reporting: Configured Dashboard with Virtual Terminal login.
- Reduced calls / emails in the "Purchasing Chain": All parties to a "FedNow" and "TCH Real-Time payments" transaction receive text & email messaging.
Good Funds Payments
Our Good Funds Gateway, we believe, is the only payment processing gateway
providing Good Funds Payments, "Real-Time" and Instant transactions, Wires, Visa Direct, ACH, Electronic Check, Credit Card, Debit Card and Paper Check conversion payment solutions all with one convenient login with the additional benefit of accounting software integrations! Our clients receive faster availability of funds on deposited items and instant notification of items presented for deposit – all based on real-time activity. Dedicated to providing superior customer service and industry-leading technology,
Good Funds Gateway provides tools to help organizations of all sizes reduce transaction costs, mitigate risk and increase efficiencies. Our system ensures proper Authentication, Authorization, Verification, Settlement, Notifications and Postings.
See our seminal white paper on Real-time ACH vs Wires in Real Estate Transactions