The Federal Reserve Board has announced the development of a round-the-clock real-time payment and settlement service, called the FedNow Service, to support faster payments in the US.
The rapid evolution of technology presents an opportunity for the Federal Reserve and the payment industry to modernise the nation's payment system and establish a safe and efficient foundation for the future. The Federal Reserve believes faster payment services, which enable the near-instantaneous transfer of funds day and night, weekend and weekdays, have the potential to become widely used and to yield economic benefits for individuals and businesses by providing them with more flexibility to manage their money and make time-sensitive payments.
The Federal Reserve says it has established over its history a broad reach as a provider of payment and settlement services to the more than 10,000 financial institutions across the country. That reach will help the FedNow Service support a nationwide infrastructure for the financial services industry to develop new faster payment services.
"Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community," said Federal Reserve Board Governor Lael Brainard. "FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers."
The Board is now requesting comment on how the new service might be designed to most effectively support the full set of payment system stakeholders and the functioning of the broader US payment system. The Board anticipates the FedNow Service will be available in 2023 or 2024.
In response to the announcement from the Fed, The Clearing House (TCH) issued a statement noting that nearly two years ago it had put into market real-time payments capabilities for the US through its RTP network. The statement went on to note that today, the RTP network reaches over 51% of the demand deposit accounts in the country and is demonstrating steadily growing transaction volume. The network was built for and is available to every US depository institution, regardless of size, on equitable terms (with no discounts for volume or minimum volume requirements).
"While we will stay abreast of the Fed’s efforts to develop its own real-time payments system which may become available in 2023 or 2024, our focus will remain on ensuring that the RTP network has reach to all depository institutions," the statement added.
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