Last Wednesday, the Federal Reserve published a press release announcing that its long-awaited instant payments service, FedNow®, will officially begin operating in July, 2023. While the service has been in the works for quite some time, with more than 100 payments processors and financial institutions having already participated in an initial pilot program, its formal release will mark a significant step forward giving businesses and consumers greater choice and speed when making payments.
Expressing excitement about the upcoming release, Fed Chair Jerome Powell boasted that the FedNow service “will enable all the banks – any bank in the United States, not just the big ones – to offer instantly available funds in real-time payments to their customers.”
In preparation for the launch, the Fed will begin formally verifying participating institutions starting the first week of April. The verification process will include an official customer testing and certification program, which has been fine-tuned to reflect ongoing feedback from participants in the pilot. In addition to formal certification, the Fed will conduct a series of production validation activities in June, to ensure that early adopters are sufficiently prepared to process live transactions using the FedNow system upon its release.
FedNow follows in the footsteps of The Clearing House’s RTP network, launched in 2017, as well as the overall increasing demand for real-time payments solutions throughout the domestic and international financial sectors. In addition to 24/7/365 instant payments access, the initial service will launch with a variety of core features, including the use of ISO 20022 messaging standards, security and fraud prevention tools, and a flexible, “receive-only” participation option to ease the transition and allow for the gradual adoption of real-time payments capabilities.
According to the Fed, early adopters who have already expressed their intention to begin utilizing FedNow in tandem with the July release “[include] a diverse mix of financial institutions of all sizes, the largest processors, and the U.S. Treasury.” As for those that may be lagging in terms of readiness, Montgomery suggests that in light of the forthcoming launch, institutions and their industry partners should “move full steam ahead with preparations to join the FedNow service.”
Interested in learning more about FedNow, as well as how best to prepare for payments in real time ahead of its July release? Visit our website to access a number of resources available on FedNow including webinars, white papers, blogs and videos.