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February 15, 2023

Everything You Need to Know About Payment Rails as a Merchant

a consumer using a payment rail

When a customer makes a purchase in-store or online, it only takes them a few clicks or a few taps of a button. But behind the scenes, information passes between financial institutions in the blink of an eye. Payment rails are what make these fast and seamless transactions possible.

What is a Payment Rail?

Payment rails are networks that make it possible to process credit card payments. They transmit information during a transaction, such as an account number or merchant identification number, between the payer and the payee, no matter their location or preferred currency.

The primary types of payment rails include:

  1. ACH or Automated Clearing House
  2. Card networks
  3. The Clearing House’s RTP® network. 
  4. lockchain and alternative payment methods

How Do Payment Rails Work?

All payment rails transmit information between banks and merchants to make fast payments possible. Below, we break down how each payment rail works for merchants, and how white-label credit cards revolutionize the process. 


The Automated Clearing House, or ACH, is one of the most popular payment rails in the world, processing over $72 trillion in transactions in 2021. To use ACH, the requester sends the bank transaction details, and then the bank sends those same details to the central clearinghouse of the ACH network. From there, the requested amount of money transfers from the payer to the payee. 

With ACH payments, merchants face associated fees that range between 20 cents and $1.50 per transaction depending on several variables. This payment rail also powers popular digital payment apps like Venmo and Zelle®. 

Card Networks

Most major credit card networks, like Visa, Mastercard, and Discover, have independent payment rail networks. When the payee swipes their credit card, the network passes information to the payee’s bank to process the transaction. 

 Card network payments typically cost the merchant between 1.5 percent and 3.5 percent of the transaction price. Card network payments can also take several days to clear.


The RTP® network launched in 2017, making it a newer payment rail option. Since its launch, the volume of transactions processed using RTP® has continued to steadily climb, reaching 49 million transactions totaling over $22 billion in the fourth quarter of 2022. The main perk of this real-time payment platform is the ability to make payments faster and more efficiently. All federally insured U.S. financial institutions can opt to use this network, and this network has a much lower fee, typically between 1 cent and $2

Alternative Payment Methods

Alternative payment methods, such as cryptocurrency or BNPL, think beyond physical credit cards by allowing buyers to purchase goods or services without the need for cash, checks or bank-issued credit cards. 

Alternative payments like store cards can be attractive to both merchants and consumers for their increased security and enhanced customer experience. For merchants specifically, private-label credit cards allow businesses to customize the checkout processes and rewards programs to meet the specific needs of their customer bases. Because these are “closed-loop” transactions (do not ride the payment rails listed above) private-label credit cards can save merchants significant money from reduced payment processing costs.   In the eyes of consumers,private-label credit cards can also lead to higher customer satisfaction and retention.

How Do Payment Rails Impact Businesses? 

Since most—if not all—payment rails require a merchant fee, they can quickly eat into a business’s revenue. Especially for startups or small businesses, sky-high payment rail processing fees can impact a business’s pricing and profitability. But there is another option for merchants looking to avoid 3.5 percent fees on every purchase: private label credit cards.  

Private label credit cards allow merchants to not only increase brand loyalty and offer consumer rewards but also help businesses save significantly on payment rail processing fees. Platforms like Tandym partner directly with businesses to create a branded credit card—but with only a .5 percent processing fee, merchants will save up to 80 percent per transaction. 

To drive loyalty, increase revenue, and reduce costs with your own digital store card, request a Tandym demo today


Nacha - ACH Network Sees 29.1 Billion Payments in 2021, Led by Major Gains in B2B and Same Day ACH

Tipalti - A Complete Breakdown of ACH Fees: Comparing ACH Costs to Other Payment Methods

Reuters - Amazon accepts Visa credit cards in global truce over fees

The Clearing House - RTP® Network Celebrates 5-Year Anniversary

The Clearing House - Simple, Transparent, Uniform Pricing for All Financial Institutions