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US faster payments competition one step closer

The Federal Reserve Banks in the US have announced that more than 110 organisations are participating in the pilot programme for their upcoming instant payments offering, the FedNow Service. The service from the Federal Reserve will provide competition for the Real-Time Payments (RTP) network offered by The Clearing House.

Establishing a pilot programme

The programme aims to support development, testing and adoption of the FedNow Service, as well as encourage development of services and use cases that leverage FedNow functionality. A key objective in selecting participants for the pilot was to ensure diverse representation across financial institutions and service providers, connection types, settlement arrangements and experience levels.

“We’re gratified by the industry’s tremendous interest and willingness to devote time and energy to help us develop the FedNow Service,” said Esther George, president and CEO of the Federal Reserve Bank of Kansas City and executive sponsor of the Federal Reserve’s payments improvement initiatives. “As a result, we’ve adjusted to accommodate more participants than we originally planned.”

“The large and diverse group of pilot participants will help us develop a service that meets stakeholder needs and can be rapidly adopted by thousands of US financial institutions and their customers,” added Nick Stanescu, senior vice president and FedNow business executive with responsibility for product management and industry readiness.

The list of participants includes banks, such as Goldman Sachs, HSBC, and JP Morgan Chase, as well as technology companies including ACI Worldwide, Finastra, and Jack Henry & Associates.

Through their involvement in the FedNow Pilot Program, participating financial institutions and processors will help shape the product's features and functions, provide input into the overall user experience, ensure readiness for testing and be the first to experience the FedNow Service before its general availability. In the initial advisory phase, participant input will help to further define the service and adoption roadmap, industry readiness approaches and overall instant payments strategy.

Creating an ecosystem

In addition to expressions of interest from eligible financial institutions and processors, the Federal Reserve received more than 80 submissions from organisations that provide payment systems and services for financial institutions and end users or that are interested in implementing instant payments to meet business or consumer needs. 

In response to this broad interest, the Federal Reserve is creating an “ecosystem participant” programme, beginning later in 2021. Among other activities, ecosystem participants will provide feedback on specific features and use cases and help support end-to-end testing of solutions leveraging the FedNow Service, in coordination with corresponding financial institution partners. Their participation is expected to help drive adoption, innovation, and breadth and depth of end-user solutions over time. Additional details will be announced soon.

“Our strong track record and commitment to industry engagement continues with this pilot programme, which represents an inclusive and collaborative approach to delivering instant payments to American consumers and businesses,” commented Ken Montgomery, first vice president and COO of the Federal Reserve Bank of Boston and FedNow program executive.

About the FedNow Service

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.

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