Fed to raise FedNow transaction cap to $10M

The Federal Reserve is increasing the transaction limit for FedNow, its real-time (instant) payment system, to $10 million beginning in November. This will mark the second time the Fed has raised the FedNow transaction limit this year. In June, the limit was raised from $500,000 to $1 million.

RTP, the private sector alternative to FedNow, raised its transaction limit to $10 million in February of this year. Directly prior, the limit was $1 million and, before that it was $100,000. RTP is owned and operated by The Clearing House, a bank-owned payments company that also competes with the Fed for wire transfer and ACH business.

The Fed, in announcing the upcoming hike in the FedNow transaction limit, said the increase will enable financial institutions and businesses to support higher-value use cases such as instant transfers between internal business accounts, corporate payrolls, vendor payments and real estate transactions.

Flexibility baked in

In revealing its plan to raise the FedNow transaction limit, the Fed said financial institutions will continue to have the flexibility to set lower limits based on internal risk parameters and business needs. It noted that recently introduced risk mitigation tools like account activity thresholds should provide FIs with greater control and confidence as they expand their instant payment offerings.

"Our second transaction limit this year reflects the growing demand for instant payments – as the benefits of immediate funds availability for all types of payments become more apparent, financial institutions need flexibility to serve customers and support internal processes," said Mark Gould, chief payments executive for Federal Reserve Financial Services, the division within the Federal Reserve Bank System that operates core payment and settlement services.

"The FedNow service is shaping how we move money, and the service will continue to be flexible to meet evolving feedback and increasing demand," Gould added.

An alternative to RTP

FedNow was made available to all federally insured FIs in July 2023, providing instant payments 24/7/365 in competition with RTP, which launched in November 2017. (Prior to the official launch of FedNow, the Fed was working out the kinks with a few dozen FIs and service providers, as well as the U.S. Treasury.)

Thirty-five "early adopters" were onboarded and using the service when it was launched. Access to funds transferred over FedNow is made available through FedLine, a secure electronic access platform FIs use to move money and information.

Today, more than 1,400 organizations (primarily FIs and their service providers) across all 50 states are using FedNow. As adoption of instant payments accelerates, the ability to move larger dollar transactions instantly "is expected to help modernize payments for financial institutions and businesses across the U.S.," the Fed said in a statement.

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