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Preparing for FedNow: FedNow vs. RTP – What’s the Difference?

FedNow is set to go live mid-year 2023, and to prepare financial institutions for its launch, Volante has published a white paper, FedNow is Almost Here: What You Need to Know to Prepare, fusing industry knowledge with research from Aite-Novarica Group, detailing everything from the system’s features, use cases, and business strategies. Here we highlight some of the key differences between FedNow and RTP presented in the paper.

Due to the pre-existing widespread utilization of TCH’s RTP network, the first iteration of FedNow will exist primarily as an alternative to RTP, and there remains considerable redundancy between the two systems. This was, of course, part of the Federal Reserve’s plan all along: to bolster economic security through increased access to 24/7 real-time payments services, and to introduce healthy competition into the space. So where do the two systems differ? For one thing, the initial FedNow system will include a significantly lower transaction limit, capping transactions at $500,000 as opposed to RTP’s $1 million.

One feature that sets FedNow apart is its liquidity management tool, which will support instant payment liquidity transfers between FedNow participants and financial institutions with real-time capabilities. Moreover, while RTP has had a significant head start, the Federal Reserve’s broad reach and access to the market has the potential to level the playing field and promote significant growth in the space based on competition. Either way, financial institutions are best served working with a trusted real-time / instant payments technology partner to quickly connect to FedNow and RTP and maximize the business value of their investment.

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