Payment rails, the ins and outs of financial payment tech

Did you order online takeout last night? How about a brand new TV on Black Friday? Then you used a smart financial tech called payment rails without even knowing it.

Payment rails are a core part of the digital financial landscape that are a part of most transactional services.

Let’s dive into payment rails and how they can bolster your Fintech’s product offering.

What are payment rails?

Payment rails are an innovative financial technology that allows users to digitally and securely send and receive payments within seconds.

With the help of payment rails, companies and individuals can instantly send and receive money, making payments much more convenient and accessible.

Worldwide, banks and digital financial institutions are connected by different payment rails, making them either more or less suitable for different transactions.

What is settlement time and why speed is important?

Settlement times refer to the amount of time it takes for money to be officially transferred from one party to another.

Payment rails are designed to make settlement times fast and straightforward, helping businesses and individuals alike to complete their transactions quickly and painlessly.

Widely used payment rail types and how they work

A few of the most common types of payment rails include:

Automated Clearing House

Automated Clearing House (ACH) is an automated system that typically processes low-value payments directly from one bank to another. An example of this is tax refunds.

How does it work?

ACH works by enabling users to transfer currency from one bank to another without having to physically hand-deliver the money. ACH payments are transferred through a digital network that connects banks throughout the U.S. (though, the concept originated in the UK).

Card payment rails

Credit or debit card processing allows customers to pay for goods and services using their card information.

How does it work?

When a customer swipes their card at the point of sale (POS) and / or makes an online payment (AKA cardholder not present transaction), their card information is typically processed through an electronic payment gateway.

The POS communicates with the customer’s bank and the merchant’s bank, verifying the customer’s identity and verifying the availability of the funds in the customer’s account.

Digital wallets

Thanks to tokenisation technology, a digital wallet, otherwise known as an electronic wallet, stores a user’s payment information for quick, secure and easy access. Digital wallets can be used to make payments with a few clicks.

How does it work?

When the customer is ready to make a purchase, they can simply authorise the digital wallet to communicate with the merchant’s payment processing system.

The payment is then actioned, and the funds are transferred to the merchant’s account. In cases where the tokenised card / debit information has changed, Account Updater technology enables card information changes (such as expiration date changes, account number changes, account closures, and more) to be conveniently updated.

One of the most common uses of digital wallets is the storage of cryptocurrency.

Real-Time Payments

Real-Time Payments (RTP) are a type of payment rails that allows for almost instant payments from one bank account to another.

How does it work?

To initiate a Real-Time Payment, the sender will provide their bank account information as well as the recipient’s bank account information. The payment is then processed and settled instantly, with the funds being transferred directly from the sender’s account to the recipient’s account.

In addition to speed, RTPs are generally also highly secure and compliant with the latest payment regulations.


SWIFT (Society for Worldwide Interbank Financial Telecommunication) is an international system that enables user-friendly and secure international payments.

How does it work?

By providing the necessary details, such as the sender’s and receiver’s bank account information, the SWIFT payment can be quickly transferred from one bank account to another.

Transactions can be made in a variety of currencies and the funds are typically transferred within two to three days.


The Single Euro Payments Area, or SEPA, is a payment system that facilitates users in the European Economic Area (EEA) to make cross-border payments in any member state.

How does it work?

SEPA payments can be made using bank account information and the Euro currency. When a SEPA payment is initiated, the funds are transferred from the sender's account to the recipient’s account within one business day.

What are the benefits of payment rails?

Payment rails offer a variety of benefits for businesses and individuals alike.

Some of the key advantages include:

  • Speed and convenience — Payment rails enable businesses to quickly process payments. This eliminates the need for businesses to wait for paper checks to clear or for payment transfers to take several days.
  • Security and compliance — Payment rails are highly secure and compliant with the latest international payment regulations.
  • Cost-effectiveness — Payment rails often incur lower transaction fees than other payment methods, making them more cost-effective.
  • Accessibility — Payment rails allow businesses and individuals to make payments from anywhere in the world.

Selecting the right payment rails strategy

Selecting the right payment rails strategy is important for Fintech startups, especially when it comes to offering customers an efficient and secure payment experience.

The first step is to identify the payment options that customers want to use, then integrate the right payment rails APIs into the product offering.

Businesses should evaluate the payment rails providers to ensure that they are secure, and compliant, and offer competitive fees and rates. This will ensure that customers have an efficient, secure, and cost-effective payment experience.

By using our APIs, Fintech startups don’t need to fumble with complex integration code or stringent regulations. Our APIs help to connect your systems with third-party payment rails providers in as fast a time as possible.

Want to see Fintech infrastructure in action? Book a live demo today.

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