The Federal Reserve Board on Monday announced that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow™ Service, to support faster payments in the United States.
According to the Federal Reserve, faster payment services, which enable the near-instantaneous transfer of funds day and night, weekend and weekdays, has “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.” However, the decision was met with differing views from national banking organizations.
ICBA, after “years of advocacy,” applauded the Fed on the announcement, claiming victory for Main Street. The system will “ensure universal access to real-time payments, avoid a megabank monopoly, and encourage innovation that will benefit consumers nationwide," ICBA stated. ICBA also issued an interactive timeline showing its years-long advocacy on the issue.
ABA’s Banking Journal reported that while the Fed said that while interoperability with other real-time payments networks—namely the Clearing House’s RTP network—would be “a desirable outcome, it did not commit in its notice to make FedNow interoperable with other networks," which is a capability that ABA has said would be critical to the success of real-time payments in the U.S. “We believe any Fed system must be fully interoperable with the RTP network, remain accessible only to chartered financial institutions, and be available through all core processing companies and without volume discounts that disadvantage smaller banks,” ABA President/CEO Rob Nichols commented.
Another major player in this debate, The Clearing House, operator of RTP® network, a real-time payment system that modernizes core payments capabilities for all U.S. financial institutions, focused on its current capabilities and services in its reaction statement: “We are already seeing how these real-time capabilities are providing for tremendous advances in speed, convenience, and security in how Americans receive and send funds. We are excited about the many ways that this revolution in payments will continue to deliver new benefits to depository institutions and their customers. 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.”
Read the Federal Reserve's announcement here.