Faster payments have made a big splash in the payment processing industry, with the Federal Reserve’s FedNow platform rolling out in 2023 to join its older rival, the Clearinghouse’s RTP network. But for merchants, the revolution has not happened yet—and might never happen. The use cases for retailers, to this point, simply do not exist.
In a new report, Real-Time Payments: Use Cases in Acquiring, Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, looks at the ways merchants might take advantage of faster payments. His advice: pump the brakes. The benefits that have driven the growth of real-time payments are a long way from having an impact on merchants.
The Challenges of Real-Time Payments
Real-time payments have been growing rapidly. RTP handled 343 million payments per day in 2024, while FedNow settled 2.13 million in the second quarter of 2025 – up from 156,000 in the year-earlier period. It’s understandable that merchants would wonder whether this technology might benefit them as well. In an ideal landscape, these processes would allow every merchant to use pay-by-bank and avoid having to pay interchange fees, with processors paying merchants in real time for batches submitted.
But some fundamental challenges exist in making this transition. For one thing, FedNow and RTP are akin to wire transfers. Wire transfers are irreversible, so once the money is sent, it can’t be reclaimed. If the money was sent in error or transferred under fraudulent circumstances, no mechanism exists for reversing that transaction.
“From a consumer’s perspective, there’s no ability to dispute that transaction,” said Apgar. “Merchants don’t have the details to help them initiate refunds if that becomes necessary. It’s not built for people to buy goods from a store, whether that store is physical or online.”
Any payment sent by wire settles during business hours, which limits their availability. That could be a boon for real-time payments, which operate 24/7 and allow merchants to get paid on the weekends. The problem is that Visa and MasterCard still use wire transfer and still settle only on business days. If a processor wanted to pay its merchants on Saturday or Sunday, it could use real-time payments to do that. But that would also require the processor to float that money, because it would not receive funds from Visa till Monday or Tuesday.
“If I’m paying you real time as a processor, which I could do, I have to have a line of credit then or some or money in the bank someplace to get that money to float it to you until I can get it from Visa MasterCard,” Apgar said. “If you’re operating at scale, there’s a cost to borrowing money. Will merchants pay a premium for that? I don’t know.”
No Recourse for Taking Payments
Another problem is that a payment must be instigated by the purchaser, which limits what the merchants can do to initiate a payment. There is no way to pull money through RTP and FedNow; it can only be sent.
“If you say, Don, I want to send you $1,000, you could send that to me all day long,” Apgar said. “But you can’t tell me, Don, take $1,000 out of my account. I don’t have that ability. At the store level, I can’t just give you my card and say take money from this like I do today. I’ve got to actually send the money. There has to be a mechanism for it.”
It’s possible that faster payments could in the future could include an automated request for payment. That would allow a merchant to ask to take that $1,000 out of a customer’s account and complete the transaction themselves. Such a scenario might offer a potential use case down the road for merchants. But the consumer would still need to be persuaded to use pay-by-bank and sacrifice all their dispute rights. Apgar considers that unlikely.
Limited Practical Applications
The growth of the industry indicates several use cases where faster payments make a lot of sense. Apgar cites the example of a website called PrivateAuto.com, a marketplace for used cars, as a largely retail-driven site.
PrivateAuto.com sells high-end vehicles. If someone is selling a car for $50,000, it’s unrealistic to expect the buyer to show up with a pocketful of cash. The faster-payments process can act as an intermediary to both parties, handling the title exchange and the money exchange to make sure that the buyer gets what he paid for and the seller gets his money.
Real-time payments could also enable real estate closings to take place on weekends, which basically doesn’t happen now. The buyer could initiate an RTP payment on a Saturday at 3 p.m. to remit the closing costs. Those are the kinds of use cases where faster payments are likely to grow because they can help with cost issues, but the merchant space remains a very different landscape.
“Even though there’s a lot of buzz, let’s distill down to what the practical applications are,” Apgar said. “I don’t see any practical applications for real-time payments in either consumers paying for stuff or businesses paying other businesses. That’s really the long and short of it. It’s not to say that this technology is a nothingburger. It certainly is a valuable development in in the way money moves. But with the way that the market is established right now, it doesn’t really have applicability as a replacement for what we do with cards today.”
Despite the conversations around faster payments, practical use cases for merchants don’t exist now. Given how merchant payments are configured today, extremely limited value can be derived in using faster payments compared with established methods like ACH.
“That makes wire transfers good for buying cars on marketplaces, or for real estate transactions, where you want the funds to be available now and the transaction is indisputable and irrefutable,” Apgar said. “Everybody wants to say, ‘Oh, yeah, faster payments, man, this is where it’s at.’ But as of now there are no practical applications for either consumers using faster payments to buy goods or for processors and acquirers using faster payments to service merchants.”
