Monday, July 17, 2023
FedNow is the first new payment system implemented by the Federal Reserve since the ACH was launched in the early 1970s. Continuous processing is also a new concept for the Fed. Historically, the Fed's payment clearing and settlement services have operated 9 a.m .to 7 p.m., Monday through Friday, and have been shut down on weekends and federal holidays.
Don't expect a bevvy of activity once FedNow goes live, however, as just 57 FIs and service providers have been certified for the service's planned launch later this month.
There are more than 10,000 banks and credit unions in the United States that will eventually need to link to FedNow. Thousands of those financial institutions (FIs), however, use third parties, like FIS and Fiserv, for processing FI-to-FI payments. Ken Montgomery, first vice president at the Federal Reserve Bank of Boston and FedNow program executive, said the Fed will continue to work with and onboard FIs throughout 2023 and beyond.
FedNow early adopters include:
"We are on track for the FedNow Service launch, with a strong cohort of financial institutions and service providers of all sizes in the process of completing the final round of readiness testing," Montgomery said. He described FedNow as an "innovative platform" intended to support multiple use cases, such as account-to-account transfers, requests for payment and bill payment.
"With go-live nearing, financial institutions and their industry partners should be confident in moving forward with plans to join the network of organizations participating in the FedNow Service," Montgomery said.
The Fed sees significant interest in faster payments. Faster payments, of course, are not necessarily instant payments, although faster payments are surpass most existing payment methods for speed. When bankers and businesses talk about faster payments, they are typically referring to same-day ACH and card-to-card transfers. New surveys by the Fed reveal that a majority of businesses (83 percent) and consumers (76 percent) already use faster payments, and most (better than 60 percent of each group) expect to use faster payments more in the future.
Businesses surveyed highlighted the importance of flexible payment options to better respond to changing business environments. Consumers said they really like mobile payment apps, like Venmo and Zelle.
Seventy-four percent of consumers used mobile payment options in 2022, the Fed said, up from just 10 percent in 2013. More than half of the consumers surveyed (53 percent) use nonbank mobile apps. While mobile apps appear as instant payments on the front end, clearing and settlement on the back end can take a day or more.
Consumers pointed to a variety of situations where they could use real instant payments, including person-to-person transfers (57 percent), account-to-account transactions (32 percent) and last-minute bill payments (30 percent).
Business owners want the benefits of better cash flow management that come with faster payments. Sixty-two percent of those surveyed cited cash flow management as one of their biggest challenges, hence the need for greater speed and timeliness of payments. Nearly half (45 percent) believe faster payments will lower costs through more efficient processing. 
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
