What’s Happening Now with FedNow?

Amy Donaghue

By: Brian Laverdure, AAP, Director, Emerging Payments Education

On August 6, Governor Lael Brainard of the Board of Governors of the Federal Reserve System addressed a virtual event to update the nation on the status of the FedNow Service, an instant payment system currently under development. Joined by President Esther George of the Federal Reserve Bank of Kansas City and Ken Montgomery, the leader of FedNow, Governor Brainard used the speech to mark the anniversary of the Federal Reserve’s original announcement of the service. She highlighted the accomplishments of the service’s first year of development and surveyed the journey ahead for faster payments in the United States.

What was announced?

The webinar was an important event because it provided the industry with an opportunity to hear directly from the senior Federal Reserve leaders guiding the advancement of instant payments, and it served as the official release of FedNow’s confirmed features and functionality. Prior to the briefing, all the payments industry knew about the service were proposals for how the system could work, but many important details were still ambiguous. However, we now have affirmation of several critical points, including:

  1. The Federal Reserve remains committed to launching FedNow in 2023 or 2024. The pandemic is not impeding its progress; if anything, the societal and economic impacts of the coronavirus underscore the significance of their efforts to improve the U.S. payment system.
  2. The system-wide maximum individual transaction limits will be established in line with “market practices and needs” at the time of launch. In other words, the originally proposed $25,000 cap on transactions will likely increase to remain competitive with the transaction limits in private sector real-time payment systems. For now, the exact dollar amount remains undetermined.
  3. Initial fraud prevention tools will include the ability for participating financial institutions to set lower transaction limits, set conditions for transaction rejection and reports that will help participants evaluate transaction activity.

What comes next for FedNow?

Although 2023 or 2024 may seem distant on the horizon, time is going to fly by! It is essential for financial institutions to remain engaged and follow new developments, so they have the knowledge to prepare for implementation. Perhaps even more importantly, financial institutions need to start taking active steps to work towards participating in instant payments. How can you do that? Here are a few suggestions:

  1. Make sure FedNow/real-time payments are on your organization’s planning agenda for next year. You need to start thinking about how to budget for improvements in supporting technologies, systems, education, training and staff.
  2. Join the FedNow Community for updates on the development timeline and to volunteer for work groups that will provide feedback to the Federal Reserve and help test certain features.
  3. Be on the lookout for news and educational events from your trusted payments experts at EPCOR!

We See Our Conference in Your Future!

While this year has been unpredictable, one thing is certain – EPCOR Payments Conference 2020 - Virtual Edition will not disappoint. Join us to discuss topics like FedNow and more as we RE-Envision the Future of Payments and SEE a 20/20 perspective of all that’s happening in the payments space this year and beyond. Register now!