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FedNow expands access to instant payments

May 07, 2023

The Federal Reserve Board’s new FedNow Service will help give participating financial institutions a competitive edge in the battle to win customers who expect faster and more seamless digital experiences.

The FedNow Service, which goes into effect in July, will expand access to instant payments to a broader base of financial institutions. The service allows businesses and individuals to send and receive instant payments around the clock, every day of the year through networked institutions that participate in the Federal Reserve’s FedLine service.

For individuals and businesses, FedNow will give recipients full access to funds immediately and provide them with more flexibility to manage their money and make time-sensitive payments.

For financial institutions, FedNow will help participants to develop and offer instant payment solutions that can attract and retain customers, reduce costs through increased efficiency and reduce interbank settlement risks.

How to get involved

Financial institutions that want to participate in FedNow can opt in to several different services within the system, including sending funds back and forth across financial institutions or choosing to only receive funds.

They can also opt in to settlement service transfers and high-dollar-limit credit transactions called liquidity management transfers.

In order to participate in FedNow, financial institutions and service providers will need to be in compliance with Operating Circular No. 8, which establishes the applicable operating procedures and technical specifications required to implement the FedNow Service, and ensure their systems are properly configured to work with the new network.

Because FedNow will use the FedLine Solutions system, an annual self-assessment of compliance with the FedLine security requirements is required.

Like any other new payment channel, risk assessments, written policies and procedures, regulatory compliance, training, fraud analysis and regular audits are important components.

Financial institutions that want to use FedNow need to perform the appropriate amount of due diligence to ensure integration into their existing systems, complete risk assessments to identify key risk areas and ensure operational procedures, internal controls and regular internal audits are in place to efficiently manage risks and prevent fraud.

How is FedNow different from Real-Time Payments (RTP)?

FedNow will introduce competition and an alternative to the RTP network, a private service from The Clearing House, launched in 2017, which is used by more than 300 financial institutions to transfer funds.

RTP is governed by the RTP Business Committee, which includes representatives from The Clearing House owner banks.

Access to FedNow, on the other hand, is through the FedLine network, governed by the Federal Reserve Bank, which will be accessible to more than 10,000 financial institutions, either directly or through agents, for transaction clearing and data transmission.

FedNow has a maximum send limit of $500,000 with a default of $100,000, which sending financial institutions can decrease, but a receiving financial institution must be able to accept $500,000. For the RTP network, the limit to accept payments is $1 million and originating participants may set a lower limit.

FedNow will allow financial institutions to use the existing FedLine infrastructure for the processing and settlement of instant payment transactions. With RTP, each financial institution in the network establishes a designated RTP account.

Both options use ISO 20022 messaging standards, which is a financial standard for exchanging electronic messages. Reducing certain types of fraud risk, FedNow and RTP are credit push networks in which the individual or organization making the payment requests a credit be pushed to the recipient.

What’s next

More than 100 early adopters of FedNow are completing customer testing and a certification program to prepare for sending live transactions through the system in July.

And the Fed will continue to onboard additional institutions with the same testing and certification program as it expands the service throughout 2023 and beyond. 

“We urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive.

FedNow expects to add more features and enhancements in future releases to continue supporting safety, resiliency and innovation as the network expands in the coming years.

Interested institutions can explore joining FedNow on the Fed’s educational website.

How Wipfli can help

Wipfli’s robust financial institutions team can help ensure you meet compliance regulations with FedNow or any new technology implementation. Explore our services for financial institutions to see how we can help you.


Teresa M. Francis, CIA, AAP
Senior Manager, Internal Audit
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