Settlement Assessment

The Federal Reserve Board has announced that the Federal Reserve Banks will build and operate 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 decision to develop the new RTGS service (Off-site)  was based on an assessment of public input and policy criteria regarding the Federal Reserve’s role in the payment system, and announced in a speech by Governor Lael Brainard (see below). A text version of Brainard’s speech is also available (Off-site).

The FedNow Service is intended to advance public policy goals for faster payments and to help support the modernization of the nation’s payment capabilities. To accomplish these goals, the FedNow Service will enable financial institutions’ provision of end-to-end faster payment services and, in combination with private-sector real-time payment services, provide infrastructure to promote ubiquitous, safe and efficient faster payments in the United States.

The Federal Reserve will also explore the expansion of Fedwire® Funds Service and National Settlement Service hours, up to 24x7x365. Subject to the outcome of additional risk, operational and policy analysis, the Board will seek public comment separately on this change.

Expanded hours for existing settlement services, in combination with a new settlement service for faster payments, would represent a modernization of Federal Reserve payment and settlement services and strengthening of the U.S. payment system. The Board is requesting public comment on the FedNow Service via a Federal Register notice (Off-site).

Interested in learning more about the planned service features, as outlined in the Federal Register notice, and how you can provide input? Check out the Five Things You Need to Know About the FedNow Service (PDF). Be sure to also read the Board’s frequently asked questions (Off-site)!

How to Comment

The Board is seeking feedback through November 7, 2019. All comments will be posted to the Board website without alteration except when necessary for technical reasons or to remove sensitive personally identifying information. We encourage you 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 regs.comments@federalreserve.gov 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

FedNow Service Description

The FedNow Service will support interbank settlement for financial institutions’ provision of end-to-end faster payment services and, in combination with private-sector real-time payment services, provide infrastructure to promote ubiquitous, safe and efficient faster payments in the United States. Features under consideration for the FedNow Service include:

  • Processing individual credit transfers valued at $25,000 or less in real time (within seconds) on a 24x7x365 basis
  • Settling payments through debits and credits to balances in financial institutions’ master accounts at the Reserve Banks, with an end-of-day balance recorded for each day of the week
  • Providing liquidity through intraday credit on a 24x7x365 basis under the same terms and conditions as for current Federal Reserve services
  • Adhering to the ISO® 20022 standard and providing access through FedLine® connections
  • Allowing participating financial institutions to designate a service provider to submit or receive payment instructions on their behalf and settle payments in the account of a correspondent bank

Background on the Settlement Assessment

Last fall, after taking into consideration requests from stakeholders, the Board requested comment via a Federal Register notice (Off-site) on potential actions the Federal Reserve could take to facilitate interbank settlement of faster payments. In response, the Board received more than 400 comments (Off-site) from a wide variety of stakeholders in the U.S. payment system, including financial institutions, individuals, consumer organizations, merchants, service providers, private-sector operators, fintech companies and trade organizations.

We received more than 350 comments on a Federal Reserve faster payment service, representing nearly 800 organizations. Fully 90% of these comments called for the Federal Reserve to operate a real-time service for faster payments.

For More Context

The Federal Reserve held public town hall meetings in each of its 12 districts and hosted a webinar to help build an understanding of the 2018 Federal Register notice with stakeholders all across the nation. Review the town hall presentation and watch the webinar recording below for more background information.