Since announcing the FedNow Service’s features and functionality, the Federal Reserve has received a lot of interest as well as questions from customers and stakeholders about various aspects of the service.
Through communications and conversations, we want to keep financial institutions and the broader payment industry informed on the design of the FedNow Service and how to prepare for it. Here are some of the most common questions we’ve received.
The Federal Reserve will take a phased approach to the FedNow Service. The initial launch is targeted for 2023 or 2024 and will focus on core functionality to meet market needs and help financial institutions transition to 24x7x365 operations. Initial features will include:
Take a look at the FedNow product sheet (PDF) for a full list of initial features and functionality. More details on timing and features will be released when available.
Our phased approach will ensure core features and functionality are brought to market as quickly as possible while providing flexibility to adjust and add features in response to industry demands or changes in technology. Additional features we’ll explore in future releases include:
Financial institutions will continue to serve as the first line of defense against fraud through services they provide to their customers. To help combat fraud, the FedNow Service is committed to providing a safe payment infrastructure for instant payments, with features to support payment integrity and data security. Fraud prevention tools available at launch will include:
We will continue to work with the industry on best practices for fraud prevention services and may augment or add features over time.
The FedNow Service will be use case agnostic, which will allow financial institutions to use it as a springboard for innovation. The first release of the FedNow Service will provide core clearing and settlement capabilities to support a broad range of transaction types, including those that are expected to gain traction initially, such as:
We will continue to work with stakeholders and providers in the industry to ensure they have the information they need about the FedNow Service to build out services supporting a variety of use cases.
The growing demand for instant payments has driven the creation of several faster payment systems, but there are some differences among them. Some are closed loop systems (PayPal, Venmo, Square’s Cash App), others are open loop (VisaDirect, MasterCard Send, Zelle, RTP, etc.) and some settle payments between financial institutions on a deferred basis while others settle in near real time.
The FedNow Service will be open to all eligible depository institutions across the country, no matter their size or geographic location. The FedNow Service will support interbank clearing and settlement in real time and will allow financial institutions to innovate to provide their customers with the ability to send and receive instant payments for a range of use cases.
For more information on the differences among various faster and instant payment systems, read our article Fast, faster, instant payments: What’s in a name?
We are finalizing our technology strategy that will incorporate a blend of internal Federal Reserve resources and partnerships with external vendors. Our intention is to prioritize using resources and technologies to create a flexible infrastructure that is able to evolve to meet current and future market needs. We will continue to keep the industry informed on our progress.
We understand the importance of interoperability to help advance nationwide reach of instant payments. The FedNow Service is committed to using the widely accepted ISO 20022 standard and other industry best practices to help remove incompatibilities that could be a barrier to payment routing, a form of interoperability, between the FedNow Service and RTP.
The Federal Reserve, however, cannot accomplish interoperability for instant payments alone. The industry—depository institutions and their service providers as well as service operators—must work towards this common goal, as it has in the past with other payment services.
It’s important that financial institutions and industry partners take appropriate steps now to make sure they’re able to use the FedNow Service when it becomes available. We recommend preparing by:
We are committed to ensuring the accessibility of the FedNow Service to banks of all sizes nationwide, which is our guiding principle for defining our design choices and onboarding process.
The Federal Reserve is committed to collaborating with industry stakeholders. Industry leaders and organizations interested in providing input in the development of the FedNow Service are encouraged to join the FedNow Community, an interactive group that advises on the design, onboarding and implementation of the FedNow Service via focus groups, work groups, conference calls, virtual meetings, surveys and other channels.
In early October 2020, we announced plans for a pilot program that will inform and support the FedNow Service’s development, testing and adoption. We invite financial institutions, service providers and payment processors to apply for the pilot program. Those who aren’t yet a part of the FedNow Community should first join the Community and then complete the application for the pilot program. Learn more about the pilot program.
Another way to stay engaged is to sign up for FedNow News, our regular email that provides updates on the FedNow Service.
For more information on the FedNow Service, including a description of the payment flow and additional resources, visit the What is the FedNow Service? page.