Understanding Infrastructure Requirements for Instant Payment Platforms
Instant payment systems are transforming commerce by enabling near-immediate fund transfers 24/7. Unlike traditional batch-based rails (e.g. ACH or wire), instant rails clear and settle each transaction in real time (typically within seconds), providing immediate credit and irrevocable finality. This “always-on” infrastructure demands robust, low-latency networks and stringent security/compliance controls.
Business and financial institutions adopting instant payments must support new messaging standards (ISO 20022), real-time processing engines, and continuous fraud/AML screening. This article examines the technical and regulatory infrastructure of major instant-payment platforms – especially in the US – including FedNow, the RTP® Network, Zelle for Business, and internationally SEPA Instant.
We discuss cloud- and API-based architectures, connectivity, settlement mechanisms, and compliance requirements (KYC/AML, sanctions screening, data protection, etc.) as they stand in 2025.
Key Instant Payment Platforms
FedNow Service (U.S. Federal Reserve)
The FedNow Service, launched July 2023 by the U.S. Federal Reserve, is a new nationwide interbank real-time payments rail. It enables any participating U.S. bank or credit union to send and receive instant credit transfers 24×7×365.
FedNow uses the ISO 20022 messaging standard for rich payment data and operates on a gross settlement basis, meaning each transaction clears and settles individually and immediately. (By contrast, ACH uses deferred net settlement.) FedNow payments are final (no reversals) once settled.
- Architecture and Connectivity: The FedNow Service has a cloud-first, highly resilient architecture. Its core infrastructure – message queues and processing engines – are hosted on Amazon Web Services GovCloud for scalability and geographic redundancy.
Participants connect over Fed-provided networks (“FedLine”): either FedLine Direct (dedicated WAN) or FedLine VPN (Advantage/Command) links to FedNow queue managers. Each institution must install an IBM MQ client and FedNow certificates on-site to exchange ISO-20022 XML messages with Fed queue managers.
API calls (e.g. submitting transfers) require a Fed-issued API certificate on the client. In effect, a bank’s payment application “sits” on its premises (or service provider’s server) with an MQ client, sending/receiving payment messages via secure FedLine channels. - Capacity & Resilience: FedNow is engineered for 24×7×365 uptime. The Fed’s multi-data-center design presents a single logical endpoint to participants; redundant infrastructure layers ensure continuous service even if one component fails.
For example, the service hosts clustered IBM MQ queue managers that automatically re-route connections upon any failure, and client systems simply reconnect to the surviving queue. FedNow’s cloud basis (AWS) gives “broad geographic points of resiliency” and elastic scalability.
Because settlement is real-time and final, banks must prepare to process and settle funds instantly – there is no built-in batch “buffer.” This demands ultra-reliable application logic and real-time reconciliation in each bank’s payments platform.
RTP® Network (The Clearing House)
The RTP Network, introduced by The Clearing House (an association of large U.S. banks) in 2017, was the first new core U.S. real-time rail in decades. Like FedNow, RTP offers 24/7/365 instant credit transfers in USD, with final settlement in under ~20 seconds.
RTP uses ISO 20022 XML messages (e.g. pacs.008) for transfers and related functions. Its architecture also relies on IBM MQ messaging: each participating FI runs an MQ client that exchanges payment requests/replies with the central RTP servers.
RTP settles transactions via a privately-managed ledger: member banks prefund a joint settlement account at the Federal Reserve, and RTP entries adjust those positions in real time.
Key differences vs FedNow: RTP is a private-sector network (owned by large banks) and requires TCH membership (although membership is no longer strictly required to participate). It maintains a higher per-transaction limit ($1 million) than FedNow’s current $500,000 cap.
RTP messages are final and irrevocable, but the settlement model (privately-funded ledger vs Fed account debits) differs. Both use ISO 20022, though their specific message flows and formats differ and will require harmonization for full interoperation.
Importantly, the popular Zelle P2P service is interoperable with RTP: participating banks may route Zelle transfers through the RTP Network for settlement. Overall, as of early 2025 RTP was more established (98 million transactions in Q4 2024) but FedNow was growing fast (1.5 million in 2024).
Zelle® for Business
Zelle is a real-time person-to-person (P2P) network created by Early Warning Services (owned by major banks). Historically focused on consumer-to-consumer transfers via a linked email/phone model, Zelle has been extended to businesses.
“Zelle for Business” allows small businesses to send and receive USD payments instantly using only the customer’s account alias (email or mobile). Technically, Zelle transactions move funds between participating banks’ accounts using internal push transfers; many settle over RTP or ACH rails behind the scenes.
For example, large banks reportedly use RTP to settle Zelle payments due to its real-time speed. Zelle operates within the U.S. banking system and does not use a separate clearing infrastructure; rather, each participating FI must credit/debit accounts immediately upon approval. As of 2025, Zelle is widely integrated into most major U.S. bank apps (for consumers) and increasingly available to business users via their banks.
Limitations: Zelle transactions are intended for “trusted” parties (irreversible after send) and historically lacked strong purchase protection. In late 2024, the CFPB even sued Zelle’s owner banks (JPMorgan Chase, BofA, Wells Fargo) for alleged inadequate fraud controls (a lawsuit later dropped).
This underscores a key point: even closed-loop rails like Zelle must satisfy AML/safety rules. In practice, banks enforce identity checks, per-transaction caps, and transaction monitoring on Zelle transfers as part of their existing compliance programs.
SEPA Instant (Europe)
Though U.S.-focused, it’s useful to compare global instant rails. In the Eurozone, the SEPA Instant Credit Transfer (SCT Inst) scheme (launched 2017) mandates that EUR payments be credited within 10 seconds. It uses the same ISO 20022 messaging as other SEPA transfers. Settlement occurs via the ECB’s TIPS (TARGET Instant Payment Settlement) system, which operates 24/7 in all EU member states.
All SEPA banks must support SCT Inst, enabling pan-European instant transfers. Crucially, European instant payments are also irrevocable and continuous, so compliance obligations (sanctions screening, KYC) apply identically. The SCT Inst rulebook explicitly requires payment providers to immediately identify any sanctioned party in an instant transaction.
Core Technical Infrastructure
Real-Time Messaging & API Integration
Instant rails are message-driven, using ISO 20022 XML schemas for payment orders and acknowledgments. This global standard provides rich data fields (remittance info, reason codes, regulatory data) which aid compliance and straight-through processing. Banks and providers typically develop or purchase software that issues ISO 20022 payment messages.
In FedNow and RTP, these messages are transported over middleware: for example, IBM MQ queue managers are commonly used. As one IBM expert notes, the RTP network is built on “MQ request/reply”: a participant’s app sends a request (pacs.008) and awaits an MQ response, all within tight time-to-live windows (~15 seconds). The FedNow Service also uses IBM MQ under the covers, with participants connecting MQ clients to Fed-owned queue managers.
Banks expose APIs to their applications (online banking, treasury systems, mobile apps) to initiate payments. In the case of FedNow, a bank’s payment platform will submit payments into the FedNow MQ network via its FedLine-connected MQ client; the Fed sends back status responses (e.g. “accepted,” “rejected”) which the bank’s system ingests.
Some service providers offer “embedded FedNow APIs” so that banks can outsource their instant payment function into the cloud, but ultimately the certified interface remains the Fed’s own API over FedLine. For RTP, banks similarly integrate with TCH’s API (or similar MQ endpoints).
In both cases, no special public API exists for end users – only banks and their approved service partners can directly access the network. Fintechs and payment providers must partner with a sponsoring FI (they cannot directly touch FedNow or RTP without such a partner).
Cloud, Microservices and Scalability
Modern instant-payment systems leverage cloud-native and microservices architecture to ensure agility and resiliency. For example, the FedNow Service is hosted on AWS GovCloud, a “cloud-first design [that] positions us for the future” (as noted by Fed officials). Cloud deployment allows FedNow to scale processing capacity on demand, distribute data across regions, and achieve continuous uptime.
Similarly, banks modernizing their own payments stack are adopting microservices: breaking legacy monolithic payments engines into smaller, independent services (e.g. one service for validations, one for clearing, one for compliance checks, etc.).
Microservices communicate via APIs and message queues, enabling parts of the system to be updated or scaled without downtime. Industry analysts highlight that shifting to microservices on cloud platforms improves time-to-market for new payment features (e.g. instant payments or Open Banking APIs) and allows banking apps to handle spikes in volume more easily.
Payment infrastructure also relies on data orchestration and event streaming (e.g. Kafka or similar) to manage the real-time flow. In practice, an instant-payment transaction touches many sub-systems:
- Authorization layer (debtor bank checks account/risk);
- Messaging layer (MQ client sending ISO 20022);
- Clearing/settlement engine (updating balances in the Fed or clearing ledger);
- Notification layer (inform sender/receiver of status).
Each layer must operate in milliseconds, 24×7, and scale horizontally (multiple instances) to avoid bottlenecks. Tools like Kubernetes, containerization, and orchestration frameworks are common for deploying this multi-tier setup.
Settlement & Liquidity Infrastructure
Instant rails require real-time settlement of central bank funds. FedNow performs gross settlement through each FI’s Fed master account (or through a correspondent’s account). In each transaction, FedNow will immediately debit the sender’s Fed account and credit the receiver’s Fed account.
TCH’s RTP, by contrast, settles via a prefunded joint Fed account: participating banks contribute liquidity to a central ledger, and RTP adjusts those ledger balances per transaction. Both methods achieve immediate finality, but FedNow’s design gives each bank more flexibility with its own accounts. Banks must therefore plan intraday liquidity (under Federal Reserve Payment System Risk rules) to ensure funds are available to settle outgoing instant payments in real time.
Resiliency and Redundancy
Because instant payments are expected anytime (even holidays), the infrastructure must tolerate faults without human intervention. The FedNow Service exemplifies this: its cluster of IBM MQ queue managers is geographically distributed, and all connectivity is redundant. If one data center or network path fails, messages reroute transparently.
Banks and service providers typically mirror this model: for example, a bank might maintain multiple FedLine Direct routers or VPN links and backup MQ client servers. Many instant payment systems also run in active-active mode across zones. In practice, the Fed recommends each participant have at least two independent FedLine connections and robust failover monitors.
Likewise, software reliability is crucial. Because there is essentially no queue clearing period, a temporary glitch in a bank’s system could cause many payment attempts to stall or expire. For RTP, MQ report expiry mechanisms exist (if a request isn’t processed in time, an MQ “expiry report” alerts the sender).
Banks must configure these with tight timeouts (seconds) and alerting. Comprehensive monitoring, retries, and alerting dashboards are therefore standard parts of instant-payments operations.
Regulatory and Compliance Infrastructure
AML/KYC and Fraud Prevention
Instant payments magnify compliance challenges because there is little delay between send and settle. Regulators emphasize that speed does not excuse compliance. The FedNow Operating Rules explicitly require participants to maintain AML programs, Customer Due Diligence, and sanctions screening as if under FinCEN oversight.
In practice, this means banks must perform standard KYC/Customer Identification Program (CIP) before enabling customers to send instant transfers, and must apply transaction monitoring in real time.
For example, banks might screen each FedNow or RTP payment against OFAC sanctions lists before sending it (or use risk scoring to decide if a payment needs manual review). The U.S. Treasury’s OFAC guidance (2022) similarly stresses a risk-based approach but with no relaxation: banks must upgrade their systems to catch potential sanctions hits even in a 10-second window.
Because there is no reversal, a fraudulent transaction is final; therefore financial institutions typically perform pre-send checks (fraud scoring, velocity limits, etc.) and may require beneficiary verification (especially for large or new-payee transfers).
Industry practitioners note that banks will need to “insert AML and fraud analysis in the transaction flow” – that is, view and act on each payment before it flows into the FedNow or RTP network. Many banks enhance their transaction-monitoring systems or deploy dedicated real-time payment screening tools to meet these demands. In Europe, the SCT Inst rulebook likewise mandates immediate sanctions checks on each instant euro payment.
Payment Regulations and Policies
U.S. instant-payment rails are governed by existing financial regulations. FedNow participants remain subject to Bank Secrecy Act (BSA) requirements, CIP rules, and exam guidelines (e.g. FFIEC’s Real-Time Payments guidance).
The Federal Reserve’s Payment System Risk (PSR) policy also applies to FedNow usage: banks must manage intraday liquidity and credit exposures for FedNow just as they do for Fedwire. The FedNow rules also align with NACHA’s cyber and OFAC rules insofar as they apply (since FedNow is technically separate from ACH, NACHA rules don’t literally apply, but “best practice” often does).
For Zelle and RTP transactions, banks rely on existing frameworks: a Zelle payment is just an internal bank credit transfer, so traditional ACH or wire compliance checks apply. In December 2024, the CFPB highlighted this by challenging Zelle’s fraud controls, emphasizing that even consumer-oriented rails must satisfy federal consumer protection and anti-fraud standards.
Data privacy is another consideration.
Instant payments involve personal data (account names, remittance info). U.S. privacy laws (like Gramm-Leach-Bliley Act) require safeguarding customer financial data. In Europe, GDPR applies to SEPA Instant transactions. Banks often architect their systems to encrypt or tokenize personal data fields. Many also use standardized business identifiers (like BIC or new Fast Payment UIDs) to minimize the sharing of sensitive personal info.
Operational Controls and Governance
Beyond automated screening, instant-payment infrastructure includes procedural controls. For example, banks can set send limits on their participants (a FedNow default is $100k, adjustable to $500k). They can also create “whitelists” of approved beneficiaries or apply risk-based hold rules.
When onboarding to FedNow or RTP, each FI must complete due-diligence checklists and certify compliance readiness. The Federal Reserve provides readiness guides and mandates that any participant/third-party follow the Fed’s operating procedures (including testing and security attestations).
In sum, the regulatory foundation for instant payments is existing financial law; banks simply must implement more real-time versions of their compliance processes. Real-time payment screening and monitoring solutions (like OFAC screens with millisecond response times) have become essential tools in this ecosystem.
Implementation Considerations
Connectivity and Onboarding
A bank or fintech wanting to enable instant payments has several pathways:
- Direct connection: Large FIs often install a FedLine Direct (WAN) router and MQ client in-house, interface their core systems with FedNow/RTP, and go live after Fed testing. They handle all infrastructure themselves.
- Via a service provider: Many banks use third-party payment processors or core-system providers who maintain certified FedNow/RTP connections. These providers (e.g. FIS, ACI, Finzly, etc.) offer cloud-based or hosted instant-payments solutions. The bank routes transactions through the provider’s MQ client or API endpoint. Castellum notes that FedNow service providers are “looking to the cloud” to streamline onboarding, and some (like FIS) are building cloud-based FedNow connectors.
- Partnering (for fintechs/PSPs): Non-bank fintechs cannot join FedNow on their own. They must partner with a sponsoring FI: the sponsor originates and receives payments on their behalf, using its FedNow connectivity. For example, a payroll vendor could initiate a payment via its bank partner, which submits it to FedNow under the vendor’s corporate account.
Regardless of route, any connection must satisfy Fed security: dedicated devices or encrypted tunnels, installation of Fed-issued certificates (for MQ and API use), and firewall rules allowing FedNow traffic. Banks also typically conduct end-to-end testing (using Fed-supplied test harnesses or sandboxes) to validate message formats and connectivity before production launch.
Core System Integration
Banks integrate instant payments into their core banking and ledger systems. A typical payment flow: a customer or corporate user instructs a payment via online banking; the bank’s front-end creates an ISO 20022 pacs.008 (credit transfer) and sends it to the payment hub. The hub performs pre-checks (funds availability, AML screen) and sends the ISO message through IBM MQ into FedNow/RTP.
Once the Fed sends back acceptance, the hub posts the ledger debit. On the receiving end, the beneficiary’s bank, upon receipt of settlement confirmation, posts the credit to the customer’s account. All of this must occur in seconds, so straight-through processing is critical.
Because of the time sensitivity, many banks operate specialized “real-time payment switch” software or microservices that sit beside (or on top of) their mainframes. This can be a commercial solution or homegrown: the key is that the instant-rail interface is separate from legacy nightly batch processes. Core banking systems may need changes to handle 24/7 postings and interim reconciliation.
Table: Feature Comparison of Instant Payment Platforms
| Feature | FedNow Service (US) | RTP Network (US) | Zelle for Businesses (US) | SEPA Instant (Europe) |
|---|---|---|---|---|
| Launch Year | 2023 | 2017 | 2017 (consumer), B2B more recently | 2017 |
| Operator | U.S. Federal Reserve | The Clearing House (banks) | Early Warning Services (bank consortium) | European Payments Council (SCT Inst scheme) |
| Transaction Currency | USD | USD | USD | EUR |
| Availability | 24×7×365 | 24×7×365 | 24×7 (via banking apps) | 24×7×365 |
| Max Transfer Amount | $500,000 (default $100k) | $1,000,000 | Typically $10k–$25k (varies by bank) | €100,000 (implementation limit) |
| Settlement | Instant gross via Fedmaster accounts | Instant via prefunded Fed account | Instant (using underlying ACH/RTP) | Instant via ECB TIPS (gross) |
| Message Standard | ISO 20022 (pain.013/pacs.008) | ISO 20022 (pacs.008, etc.) | Proprietary (app token); underlying rails ISO/AFC | ISO 20022 (pain/pacs messages) |
| Membership | Any U.S. depository institution | Insured U.S. depository institutions (now open to all) | Any consumer/business with bank account in network | Any SEPA bank/account |
| Interoperability | Domestic only (so far) | Domestic only | Domestic only | EU-wide |
| Cross-Border Use | None (USD only) | None (USD only) | None | Limited (Eurozone only) |
| Message Flow Differences | (Different formats than RTP) | (Different formats than FedNow) | – | – |
| Adoption (2024) | ~1,200 FIs live (Jan 2025) | ~670 FIs live (2024) | ≈80% of U.S. banks offer (wide consumer use) | >90% SEPA banks (mandated) |
FAQs
Q: How does ISO 20022 affect instant-payments infrastructure?
A: ISO 20022 is the mandated message format for FedNow, RTP, and SEPA Instant. It provides rich XML schemas for payments, enabling firms to include detailed remittance and regulatory data. Banks must upgrade or adapt their payment systems to send/receive ISO 20022 messages.
Many rely on middleware (like IBM MQ) to handle these messages. The change means more stringent parsing and validation but improves straight-through processing and compliance (since e.g. fields for tax or regulatory IDs can be included).
Q: Are instant payments reversible? What if a fraud occurs?
A: No, instant credit transfers are final and irrevocable once settled. This finality enhances certainty for payees but places responsibility on senders (and their banks) to verify payments first. To mitigate fraud, banks enforce anti-fraud checks before sending a payment.
In practice, if a fraud is later detected, the victim must rely on other remedies (e.g. claims, insurance, law enforcement). Hence, the infrastructure supports optional “request for return” messages or dispute processes, but the payment itself cannot be simply undone like an ACH reversal.
Q: How do banks comply with KYC/AML given the speed?
A: Banks integrate compliance into the instant-payment flow. Prior to enabling any customer on the network, banks complete full KYC/CIP checks. For each transaction, they run screening and risk scoring in real time.
Some banks use rules (e.g. block lists, transaction limits) to catch suspicious payments before sending. Rapid transaction monitoring systems are now standard to flag high-risk activity within the few seconds available. The key is automation: legacy manual processes are too slow for instant rails.
Q: Can fintechs or businesses connect directly to these platforms?
A: Only regulated financial institutions (or their registered agents) may connect directly. For FedNow, a bank or credit union (or a service provider acting for many banks) holds the Fed account and FedLine connection.
Fintechs must partner with such an institution to access FedNow or RTP. Zelle and other overlay services similarly require an underlying bank partnership. No standalone “instant payment app” can bypass the bank rails.
Q: What are the cybersecurity requirements?
A: Institutions must use strong encryption (TLS) on all API/connection links and protect access keys/certificates tightly. Because the rails operate continuously, banks implement automated security monitoring (e.g. intrusion detection) 24/7. Many rails offer fraud prevention controls (e.g. blocking suspicious endpoints).
FedNow participants also undergo Fed audits on security, network, and operational risk as part of Fed oversight. In short, instant rails require end-to-end security: encrypted channels, PKI-based certificates for Fed API, firewall protections, and continuous monitoring.
Key Takeaways:
- Round-the-Clock Settlement: Instant-payment rails (FedNow, RTP, etc.) operate 24/7/365 with near-instant clearing and irrevocable settlement.
- ISO 20022 Messaging: All major instant systems use ISO 20022 XML for richer payment data. Banks use middleware (e.g. IBM MQ) to send/receive these messages.
- Cloud-Native Architecture: Platforms and banks are moving to cloud and microservices for scalability. FedNow is hosted on AWS GovCloud for resilience, and banks are breaking payments systems into API-driven services.
- Security & Compliance: Real-time fraud/AML controls are mandatory. FedNow participants must implement AML/CIP programs and immediate sanction screening. Fraud risk is higher due to immediacy, so banks inject automated checks into the pre-send process.
- Platform Differences: FedNow (Fed-run) and RTP (bank-run) have different settlement models, ownership, and limits. Zelle (owned by banks) primarily serves consumers but now includes business use. SEPA Instant (EU) offers a comparable model in euros, via the ECB’s TIPS system.
- Integration Options: Financial institutions can connect directly to instant rails via FedLine or through service providers. Fintechs/merchants must partner with banks to access these networks. Robust testing and validation of the ISO 20022 flows are critical before go-live.
Conclusion
By 2025, instant payments have become a fundamental part of the financial landscape. Systems like FedNow, RTP, Zelle for Businesses, and SEPA Instant offer rapid settlement and liquidity certainty to businesses and consumers. However, supporting these rails demands a modernized infrastructure: cloud-native platforms, message-queue connectivity, and microservices-based payment engines to handle 24/7 loads.
At the same time, regulatory compliance (AML/KYC, sanctions, privacy) must be met in real time. In practice, banks and fintechs are deploying advanced real-time monitoring, AI-powered screening, and automated risk controls to keep pace. The FedNow Service’s 2024 growth (over 1,200 banks onboarded and rapid transaction volume increase) illustrates strong industry momentum.
Going forward, interoperability (e.g. between FedNow and RTP) and global linkages (potential FedNow cross-border linkages) will shape the evolution of these platforms. For business and financial professionals, understanding this infrastructure – from the low-level MQ connections to the front-end compliance checks – is key to leveraging instant payments securely and effectively.