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What is the FedNowSM Service?

The FedNow Service is a new instant payment service that the Federal Reserve Banks are developing to enable financial institutions of every size, and in every community across the U.S., to provide safe and efficient instant payment services in 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. Consistent with the Federal Reserve’s historical role of providing payment services alongside private-sector providers, the FedNow Service will provide choice in the market for clearing and settling instant payments as well as promote resiliency through redundancy. Financial institutions and their service providers will be able to use the service as a springboard to provide innovative instant payment services to customers. We will update this page as we have more information about this new service, which is under development and will continue to evolve.

Launch Timing

Implementing the FedNow Service in an efficient and safe manner remains a high priority for the Federal Reserve. While the target release date remains 2023 or 2024, we intend to announce specific launch timing once we complete additional development work. The FedNow Service will be deployed in phases so that the initial service can be launched expeditiously with additional features and enhancements released in stages after the initial launch. This phased approach will allow for adjustments and improvements in response to industry needs or changes in technology.

Service Design

The Federal Reserve reached a milestone in the development of the FedNow Service with the August 6, 2020, announcement of the service’s features and functionality. Industry feedback and in-depth analysis, including over 180 comment letters (Off-site) in response to the August 2019 Federal Register notice (Off-site), helped drive the FedNow Service features and design. Read the Board’s press release (Off-site) for more information on the latest Federal Register notice, which provides the full FedNow Service description.

The initial FedNow Service launch will include:

  • Core clearing and settlement capabilities to support a range of transaction types and use cases
  • Use of the widely accepted ISO® 20022 standard and other industry best practices to support interoperability
  • Features that will support flexible adoption, including support for the use of service providers and correspondents and an option to enroll as a “receive-only” participant
  • Value-added features including request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions
  • Features to enhance experience for financial institutions by broadcasting participant availability to support their transition to 24x7x365 operations, a user interface to support data needs and the ability to have access to balance information on weekends
  • Features to support payment integrity and data security and tools to help financial institutions combat fraud, such as a transaction value limit and reporting features
  • A liquidity-management tool that will allow participants and others to transfer funds to each other to support the liquidity needs of instant payments

After the initial service launch, we hope to offer additional features related to fraud prevention, error resolution and case management. We will continue to explore other features, including potential support for person-to-person payments that use the alias of a receiver. Ongoing engagement with the industry, including a pilot program, will play a role in our implementation plans.

Payment Flow

The figure below illustrates a completed payment over the FedNow Service in its simplest form. This process is designed to take place within seconds.

FedNow Payment Flow
  1. In step 1, a sender (i.e., an individual or business) initiates a payment by sending a payment message to its financial institution through an end-user interface outside the FedNow Service. The sender’s financial institution is responsible for screening the payment according to its internal processes and requirements.
  2. In step 2, the sender’s financial institution submits a payment message to the FedNow Service.
  3. In step 3, the FedNow Service validates the payment message, for example, by verifying that the message meets message format specifications.
  4. In step 4, the FedNow Service sends the contents of the payment message to the receiver’s financial institution to seek confirmation that the receiver’s financial institution intends to accept the payment message. At this point, the receiver’s financial institution will have the opportunity to confirm or deny that it maintains the specified account.
  5. In step 5, the receiver’s financial institution sends a positive response to the FedNow Service, confirming that it intends to accept the payment message. Steps 4 and 5 are intended to reduce the number of misdirected payments and resulting exception cases that can occur in high-volume systems.
  6. In step 6, the FedNow Service debits and credits the designated master accounts of the sender’s and receiver’s financial institutions (or their correspondent financial institutions), respectively.
  7. In step 7, the FedNow Service sends a payment message forward to the receiver’s financial institution with an advice of credit and in parallel sends an acknowledgement to the sender’s financial institution, notifying it that settlement is complete.
  8. In step 8, the receiver’s financial institution credits the receiver’s account. As a term of the FedNow Service, the receiver’s financial institution must agree to make funds available to the receiver almost immediately after step 7. This crediting to the receiver’s account as well as the debiting of the sender’s account by their respective financial institutions happens outside the FedNow Service.

Resources

For more information, please review the FedNow Service product sheet (PDF). Keep up with the latest FedNow news and instant payments education on the FedNow Service page. To help inform the development of the FedNow Service, join the FedNow Community by submitting our participant profile form. If you do not want to commit to the FedNow Community but would like to receive FedNow emails, please submit our FedNow Service Interest Form (Off-site).

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