Credit Rails

Let’s dive into the exciting world of credit rails!

Credit rails are the underlying infrastructure that moves money from one place to another.

Technological advances in payment infrastructure have emerged, like instant payments compared to other means of sending money like ACH or wire transfers.

Technological advances in payment infrastructure have emerged, like instant payments compared to other means of sending money like ACH or wire transfers.

We are going to talk about three new rail systems in the payment infrastructure ecosystem:

a) RTPs - Real Time Payments, introduced back in 2017, rail sends payments instantly and irreversibly, at any time. Only the payers can approve RTPs to ensure its authorized.

There is a beautiful infographic that shows how RTPs work from my friends at below:

b) Cryptocurrency

Decentralized systems like Bitcoin and Ethereum are used to send and recieve payments in a base crypto token. Blockchains use proof-of-work or mining methods to verify these transactions.

It should be noticed that the processing time for cryptocurrency transactions generally lands between 10-40 minutes.

c) FedNow

This is the latest instant payment rail developed by the Federal Reserve, that recently launched.

The payer authorizes the payment by requesting it from their bank, which must be part of the FedNow network.

The fees associated with the Fednow payment rail, are much lower where participating banks pay $25 a month to receive credit transfers, $0.045 per transaction, and $0.01 is charged per request for payment message.

So you dear reader, must be wondering what is the the future of payment rail infrastructure?

Dynamic routing

Dynamic routing uses algorithms to find the best route, to optimize a payments path, unlike static routing where payments follow a redetermined route.

The impact it will have on businesses is that it’ll help businesses complete more payments, process faster and lower costs. Dynamic algorithms can assess traffic congestion, cost differences to determine the best route.

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