The Federal Reserve Banks are developing the FedNow Service to facilitate nationwide reach of instant payment services by financial institutions – regardless of size or geographic location – in near real-time, around the clock, every day of the year.
Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments conveniently, and recipients will have full access to funds within seconds, giving them greater flexibility to manage their money and make time-sensitive payments. Access will be provided through the Federal Reserve’s FedLine® network, which serves more than 10,000 financial institutions directly or through their agents.
The first release of the FedNow Service will provide baseline functionality that will support market needs for a range of use cases, including those that are gaining in usage, like account-to-account (A2A) transfers and bill pay. Subsequent releases of the FedNow Service will implement additional features to support even more instant payment use cases.
The initial FedNow Service launch will include the following:
Core clearing and settlement capabilities to support various transaction types and use cases.
Use of the widely accepted ISO® 20022 standard and other industry best practices to support interoperability.
Features that will support flexible adoption, including support for using service providers and correspondents and an option to enroll as a “receive-only” participant.
Value-added features, including request-for-payment capability and tools to support participants in handling payment inquiries, reconcilements, and exceptions.
Features to enhance the experience for financial institutions by broadcasting participant availability to support their transition to 24x7x365 operations, a user interface to support data needs, and the ability to have access to balance information on weekends.
Features to support payment integrity, data security, and tools to help financial institutions combat fraud, such as transaction value limit and reporting features.
A liquidity-management tool that will allow participants and others to transfer funds to each other to support the liquidity needs of instant payments.
After the initial service launch, the Fed hopes to offer additional fraud prevention, error resolution, and case management features. They will continue to explore other features, including potential support for person-to-person payments that use the alias of a receiver. Ongoing engagement with the industry, including a pilot program, will play a role in their implementation plans.
Corporate One was selected as a participant in the FedNow Service Pilot Program in January 2021. The service is expected to launch in 2023.