Exploring RTP Rails for Healthcare

This is Part 3 of "The Architecture of Modern Healthcare Banking" series. Part 1 covered payment network fundamentals. Part 2 explored Durbin economics.

At 3:47 PM on a Tuesday, a dental practice in Austin receives a $12,000 insurance remittance. By 3:49 PM, those funds are available in their operating account, ready for payroll processing or supply orders. Two minutes. That is RTP working as designed. But I spent months treating instant settlement as a checkbox feature before I understood that the underlying rails enable entirely new product categories. The difference between knowing that real-time payments exist and understanding how ISO 20022 messaging, 24/7/365 operations, and settlement finality work at the infrastructure level is the difference between offering commoditized banking and building products that solve actual operational problems for healthcare practices.

Most of the implementation documentation got written at 5 AM in Zionsville before heading to the accelerator. SFTP logs and ISO 20022 schemas side by side. What I learned is that real-time payments are not faster ACH. They are different infrastructure.

Real-time payments operate through two primary rails in the U.S.

RTP Network (The Clearing House): Launched 2017, privately operated. Reaches approximately 71% of U.S. demand deposit accounts. 24/7/365 operation with sub-second settlement. Credit push only (no debit capability).

FedNow Service (Federal Reserve): Launched July 2023, government operated. Growing network coverage targeting 90%+ DDA reach. 24/7/365 with similar technical capabilities. Credit push only, with request-for-payment messaging.

Both networks enable immediate, irrevocable funds transfer between financial institutions. Unlike ACH (which batches and processes 3x daily), RTP/FedNow transactions settle individually in real-time.

Technical differences that matter: message format uses ISO 20022 standard vs. ACH's legacy Nacha format. Settlement finality is immediate and irrevocable vs. ACH's 60-day return window. Operating hours run 24/7/365 vs. ACH's business day limitations. Transaction limits are $1M per transaction vs. ACH's $1M same-day limit.

For healthcare practices with unpredictable cash flow timing, these differences create operational value worth paying for.

Our 777-practice survey revealed specific scenarios where traditional ACH delays create operational friction. Friday afternoon emergencies: practice needs supplies for Monday morning procedures, but vendor requires immediate payment. ACH will not settle until Tuesday. RTP settles in seconds. Payroll timing: bi-weekly payroll due Friday, but insurance remittance arrives Wednesday afternoon. Instead of bridging with credit, instant settlement enables same-day payroll funding. Equipment purchases: $45,000 dental chair with limited-time pricing requires immediate payment. Wire transfers cost $25-45 and require manual processing. RTP costs $0.25-1.00 and processes instantly. Tax payment deadlines: quarterly tax payments due at 11:59 PM. Traditional wires cut off at 3 PM. RTP processes until midnight (depending on bank policies).

These are not edge cases. They are recurring operational challenges that cost practices time, money, and flexibility.

Integrating RTP/FedNow requires understanding message formats, participant directories, and settlement mechanics that most fintech platforms abstract away. Real-time payments use ISO 20022 XML messaging, different from ACH's fixed-width format:

<CstmrCdtTrfInitn>
  <GrpHdr>
    <MsgId>PRAC001-20250117-001</MsgId>
    <CreDtTm>2025-01-17T15:47:32</CreDtTm>
    <NbOfTxs>1</NbOfTxs>
    <CtrlSum>12000.00</CtrlSum>
    <InitgPty>
      <Nm>Austin Dental Associates</Nm>
      <Id>
        <OrgId>
          <Othr>
            <Id>12-3456789</Id>
            <SchmeNm>
              <Cd>TXID</Cd>
            </SchmeNm>
          </Othr>
        </OrgId>
      </Id>
    </InitgPty>
  </GrpHdr>
</CstmrCdtTrfInitn>

This structured format enables rich data transmission: remittance information, invoice numbers, patient identifiers, and other healthcare-specific metadata that ACH cannot accommodate.

Participant directory management is another layer most fintechs skip. RTP/FedNow require real-time directory lookups to verify recipient bank participation and routing information. The RTP Directory API handles real-time routing number validation, participant bank capability checking, and account number format verification. The FedNow Directory provides similar functionality through FedPaymentsDirectory with cross-network routing optimization and future interoperability planning. Healthcare fintechs that implement directory lookups properly can provide predictive UX, showing users whether instant settlement is available before they initiate transfers.

Unlike ACH's net settlement, RTP/FedNow require prefunded positions at the Federal Reserve or correspondent banks. Sender's bank must have available Federal Reserve account balance. Real-time debiting occurs before message transmission. No settlement delay or netting. Funds move immediately. For healthcare fintechs, this means maintaining adequate liquidity to support instant settlements, especially during high-volume periods like insurance remittance cycles. Our implementation approach: liquidity monitoring through real-time Fed account balance tracking, predictive prefunding using AI-based cash flow forecasting for overnight positioning, fallback routing with automatic ACH fallback when RTP/FedNow is unavailable, and cost optimization through dynamic routing based on transaction size and urgency.

The file exchange infrastructure that VCs never ask about is where reliability actually lives. SFTP (SSH File Transfer Protocol) provides encrypted file transfer over SSH. PGP (Pretty Good Privacy) provides asymmetric encryption for file contents. Healthcare fintechs processing RTP/FedNow transactions exchange multiple file types daily.

Daily settlement files use ISO 20022 camt.054 (Credit Advice) format containing completed transaction confirmations, timestamps, and reference numbers. Delivered end-of-day via SFTP + PGP encryption. Reconciled against internal transaction logs. Exception reports use ISO 20022 camt.056 (Return) format containing failed transaction details and return reason codes. Delivered in real-time for immediate handling. Requires customer notification, retry logic, and accounting adjustments. Liquidity reports come in bank-specific formats (typically JSON or XML) with Fed account balances, available credit lines, and overnight positions. Delivered multiple times daily for cash management and automated prefunding decisions.

# Daily 9 PM ET settlement file exchange
sftp banking-partner.com
cd /settlement/outbound
put CLIN_RTP_Settlement_20250117.pgp
cd /settlement/inbound
get BANK_RTP_Confirmations_20250117.pgp
disconnect

# Decrypt and process
gpg --decrypt BANK_RTP_Confirmations_20250117.pgp > confirmations.xml
python3 reconcile_settlements.py confirmations.xml

This operational complexity is invisible to end users but critical for reliable service delivery.

RTP currently reaches approximately 71% of U.S. demand deposit accounts through participating banks. Coverage is not uniform. Large corporate accounts have >90% coverage. Small business accounts sit around 75%. Consumer accounts at major banks around 85%. Credit union members drop to approximately 45%. Community bank customers around 35%. Rural and regional banks are highly variable.

For healthcare fintechs, this creates strategic opportunities. Practices banking with major institutions (Chase, Wells Fargo, Bank of America) have high RTP availability. Those with local community banks may need FedNow integration or ACH fallbacks. Our coverage analysis of 777 practices: 67% bank with RTP-participating institutions, 23% bank with FedNow-only participants, 10% require ACH-only processing. This distribution influences product design. We offer instant settlement where available, fast ACH where not, with transparent communication about delivery timing.

Both RTP and FedNow support "Request for Payment" (RfP) messaging, the ability to send payment requests that recipients can approve and settle instantly. Healthcare RfP use cases include patient payment requests for treatment plans or outstanding balances, insurance follow-up requesting expedited claim payments with supporting documentation, vendor payments requesting immediate payment for rush supply orders, and partner practice payments requesting transfers between affiliated practices.

RfP messages use ISO 20022 pain.013 format:

<RqstForPmt>
  <RqstId>INV-2025-001234</RqstId>
  <Amt>
    <InstdAmt Ccy="USD">1500.00</InstdAmt>
  </Amt>
  <RmtInf>
    <Ustrd>Root canal treatment - Patient ID 78291</Ustrd>
  </RmtInf>
  <DueDate>2025-01-24</DueDate>
</RqstForPmt>

Recipients receive requests through their banking interface and can approve with a single click, settling instantly via RTP/FedNow.

Real-time payments have different cost structures than ACH. RTP pricing (typical): $0.045 per transaction sending bank, $0.01 receiving bank, $0.055 total cost per payment. FedNow pricing: similar $0.055 total cost structure. ACH pricing (comparison): $0.25-1.00 per transaction depending on volume, lower per-transaction cost but slower settlement. For high-value healthcare transactions, instant settlement justifies premium pricing. For routine transactions, cost optimization through intelligent routing matters.

Our pricing strategy: RTP/FedNow at $2.50 per transaction for instant settlement, same-day ACH at $1.50 per transaction, standard ACH at $0.50. Practices choose based on urgency, with most opting for instant settlement during cash flow crunches and standard ACH for routine transfers.

Healthcare fintechs that master real-time payment rails build sustainable competitive advantages through four compounding mechanisms. Cash flow intelligence: real-time settlement data provides superior cash flow visibility so practices can make operational decisions based on confirmed liquidity rather than projected settlement timing. Supplier network effects: practices prefer banking partners that enable instant payments to preferred suppliers, and fintechs that build supplier networks with RTP/FedNow integration create sticky ecosystems. Credit product enhancement: instant settlement enables new credit products where lines of credit fund instantly when needed and repayments settle immediately when cash flow improves. Operational automation: real-time settlement enables automated cash management with rules for automatic fund transfers, bill payments, and investment sweeps based on real-time balance data.

Building RTP/FedNow capability requires significant investment. Technical requirements include ISO 20022 message processing, real-time directory lookups, liquidity management systems, exception handling workflows, and reconciliation automation. Operational requirements include 24/7 monitoring and support, exception handling procedures, customer communication processes, regulatory compliance documentation, and partner bank coordination. Investment timeline: 3-6 months planning and design, 6-12 months technical implementation, 3-6 months testing and certification, 12-18 months total to production launch. Most healthcare fintechs underestimate this complexity and launch with basic ACH capabilities, missing the competitive advantages that real-time rails provide.

RTP/FedNow technical knowledge enables product innovation that competitors cannot replicate without similar infrastructure investment. Instant virtual cards funded immediately when cash flow improves. Dynamic credit lines adjusting availability based on real-time deposits. Automated cash management sweeping excess funds to high-yield accounts instantly. Supply chain financing with instant payment to suppliers on practice-favorable terms.

These features compound the Durbin advantage from Part 2. Better unit economics fund infrastructure investment. Infrastructure enables differentiated products. Differentiated products command premium pricing and loyalty. Loyalty generates more transaction volume and interchange revenue. This is how technical infrastructure depth becomes sustainable competitive advantage in healthcare fintech.

Real-time payment rails are still early infrastructure. FedNow launched less than two years ago and many banks are still implementing capabilities. Healthcare fintechs that understand these systems deeply will build the platforms that define how practices manage cash flow over the next decade. The opportunity is not speed for speed's sake. It is using instant settlement as the foundation for financial products that solve real operational challenges for providers who have been underserved by legacy banking infrastructure for too long.

This concludes "The Architecture of Modern Healthcare Banking" series. Next week, we begin "The Compliance-First Fintech Playbook" with KYC/KYB requirements that go beyond standard banking.

Data sources: Federal Reserve FedNow documentation, The Clearing House RTP specifications, internal implementation experience, 777-practice survey data on cash flow timing