Over 1,000 highly engaged stakeholders participated in a series of webinars to learn more about the Board of Governor’s recent announcement to build and implement the FedNowSM Service – a new interbank 24x7x365 real-time gross settlement (RTGS) service with integrated clearing functionality to support faster payments in the United States.
“The future of the payments system truly is real-time, like so many aspects of our lives today. A payments system that operates in real-time can offer economic benefits for both consumers and businesses, and at the same time, reduce risk,” noted Connie Theien, the Fed’s senior vice president and director of payments industry relations. Theien and Federal Reserve Board Principal Economist, Kirstin Wells, devoted a good portion of the webinars to addressing questions submitted by stakeholders. Below we highlight some of the questions asked during those webinars.
- How will the FedNow Service support the development of faster payment services in the United States?
The FedNow Service, alongside services provided by the private sector, will help establish a safe and efficient nationwide infrastructure that supports faster payment services in the United States. This infrastructure will assist financial institutions across the country and the broader payment industry in their efforts to build modern, innovative and safe faster payment services.
- Who is eligible to use the FedNow Service? Will merchants, consumers or non-bank fintech companies also be able to use the system?
As with existing Reserve Bank interbank services, the FedNow Service would be available to depository institutions eligible to hold accounts at the Reserve Banks under applicable federal statutes and Federal Reserve rules, policies and procedures. Participating depository institutions will be able to designate a service provider or agent to submit or receive payment instructions on their behalf. Merchants, consumers and non-bank payment service providers will access the service through their financial institutions as they do today with other payment systems.
- Will the FedNow Service support both pull and push payments?
The service would be designed to support credit (push) transfers, where a sender initiates a payment to an intended receiver for a variety of use cases, such as person-to-person payments, bill payments and smaller-value business-to-business payments.
- What is the Fed’s timeline for introducing the FedNow Service? What about the exploration of expanded Fedwire® and National Settlement Service hours?
The timeline for both efforts will run in parallel and as quickly as possible. We recognize that establishing the FedNow Service will need to be carried out as soon as practicably possible and that time-to-market is an important consideration for many industry participants. However, the achievement of true nationwide reach, as opposed to initial availability of a service, is a critical measure of success for faster payments. Pending engagement between the Federal Reserve and the industry to inform the final service design and implementation timeline, the FedNow Service is expected to be available in 2023 or 2024.
- How will pricing be determined for the FedNow Service?
Before the FedNow Service is launched, the Board will announce the service’s fee structure and fee schedule. Based on prevailing market practices, the FedNow Service fee structure would likely include a combination of per-item fees, charged to sending and potentially, to receiving banks, and fixed participation fees. The ultimate fee structure and schedule would be informed by market practices at the time of implementation, which could evolve from today’s practices. Separate per-item fees could also be charged for other message types that may be offered in the future.
- Will the FedNow Service make the ACH network irrelevant? Will the ACH network go away?
We can expect the FedNow Service to bring new payments capabilities to market, adding to the toolbox of what’s available. But different payments systems meet different needs. ACH is a proven payment system that is ubiquitous, widely used and a very good match for many payment use cases.
- Will cross-border transactions be available?
The FedNow Service will support domestic payments between eligible U.S. financial institutions only. Cross-border payments could be considered in collaboration with the industry in the future.
- How can I provide input on the FedNow Service?
The Board is seeking feedback through November 7, 2019, through the Federal Register (Off-site) notice. All comments will be posted to the Board website without alteration except when necessary for technical reasons or to remove sensitive personally identifying information. You are encouraged to provide comments via the following options:
- Board website: Follow the instructions for submitting or viewing comments on the Proposals for Comment (Off-site) page
- Email: Send an email to email@example.com and include the docket number, OP-1670, in the subject line
- Fax: (202) 452-3819
- Mail: Ann E. Misback, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551
Still have more questions? Want more information?
Watch the FedNow Service recorded webinar with Q&A from both sessions below or view our frequently asked questions (Off-site). For additional context about the journey to faster payments, including the FedNow decision and planned service features, please visit the Settlement Assessment page.