I am happy to join FedNow’s early adopter workshop.1 As the technical testing phase of FedNow℠ kicks off in mid-September, I want to especially thank early adopters of the important investments they are making in preparing for the day FedNow begins next year. Together with our partners, we will be ready to launch FedNow between May and July of 2023, providing this innovative instant payment infrastructure to financial institutions of all sizes across America. We’ve worked hard on on-time delivery, but ultimately, the number of US businesses and households with access to instant payments will depend on the financial service providers making the necessary investments to upgrade our payments infrastructure. Together, we can ensure that all Americans have access to a modern and reliable instant payment system.
The payment system is an important part of the American infrastructure that touches everyone. Americans rely on the all-day payment system every day to make purchases, pay bills, and get paid — without ever having to think about the complex infrastructure running under the hood. American families and businesses want and deserve payment transactions that run smoothly, reliably, and efficiently.
Promoting secure, efficient, and widely accessible payments infrastructure has been a key part of the Fed’s mission since the beginning. Federal Reserve Banks across the country have provided payment and settlement services alongside the private sector for more than 100 years. During that period, we have repeatedly innovated and invested in collaboration with the private sector to transform the payment system, using the latest technology to better meet the needs of businesses and families.2 Now, after extensive industry involvement and planning, the Federal Reserve is on track to deliver FedNow by May to July of 2023.
FedNow will change the way daily payments are made across the economy, bringing significant gains to families and businesses with the ability to send instant payments any time on any day, and funds immediately available for recipients to make other payments or efficiently manage cash flow. . The immediate availability of funds can be especially important for families managing cash to paycheck paychecks or small businesses with cash flow constraints. Having the ability to manage money in real time can help families avoid costly late payment fees or free up working capital for small businesses to fund growth. Indeed, during the pandemic, we have seen how important quick access to money is, as many families begin spending emergency relief payments on the day they receive it.3
To deliver on the promise of the payment system of the future, the Federal Reserve made a core commitment to the FedNow platform, which leveraged innovative technologies and methods proven by global technology companies that are always vital today in the digital economy. Our cloud-first design, unique among central bank instantaneous payment services, sets us ahead by enabling not only the productivity and scalability required for high-volume retail transactions but also broad geographic points of flexibility to ensure continuous service. Cloud-first design provides other key technology components such as self-repair and automation, which add to operational flexibility. Our development processes are flexible, allowing us to deliver new features faster to financial institutions of all sizes as they are ready to adopt them based on their priorities.
We’ve also invested heavily in stakeholder engagement to ensure service adoption readiness through efforts such as the Pilot Program, FedNow Resource Explorer, FedNow Community, Service Provider Demonstration, and FedNow Early Adopter Workshop.4 To further the goal of nationwide access to instant payments, we worked closely with the private sector RTP service on messaging specifications to ensure compatibility in supporting routing interoperability.
Just as the Federal Reserve has made a significant commitment to new instant payment infrastructure, we are calling on industry stakeholders to do the same. Shifting to real-time payment infrastructure requires a focused effort, but the shift is inevitable. Now is the time for all key stakeholders – financial institutions, primary service providers, software companies, and application developers – to devote the necessary resources to support instant payments. This means upgrading back office operations, evaluating accounting procedures to accommodate seven working days a week, arranging liquidity providers, deploying a new customer-facing application, and promoting instant payments for key customer use cases. As service providers will appear at this event in the coming days, parts of the industry have already seized the opportunity to build new services and capabilities that support instant payments. These efforts will increase market competition for end-user services and foster innovation – key benefits from providing FedNow as a neutral platform, accessible to financial institutions of all sizes nationwide.
I would like to personally thank our early adopters. The input you provided was helpful to our team as they designed and built the service, and the time and energy you committed to this effort are critical to a successful launch. I’d like to invite additional banks and primary service providers to join your commitment to getting ready for FedNow adoption. This time next year, I hope we will have a great sense of accomplishment in our joint effort to transform America’s payment system into the digital age.
1. I am grateful to Kirsten Wells of the Federal Reserve for her assistance in preparing this text. The opinions expressed here are my own and do not necessarily reflect those of the Federal Reserve or the Federal Open Market Committee. Back to text
2. Lyle Brainard,”Support fast payments for everyone“(Notes in the Fed Payments Improvement Community Forum, Chicago, October 3, 2018); Esther George,”From Then to FedNow: Payments Innovation and the Federal Reserve (PDF)Policy Perspectives (Kansas City: Federal Reserve Bank of Kansas City, December 18, 2020). Back to text
3 – Lyle BrainardThe future of retail payments in the US(Notes at FedNow Service Webinar, Washington, D.C., via webcast, August 6, 2020). Back to text
4. Information about FedNow Stakeholder Outreach and other resources can be found at this link: https://www.frbservices.org/financial-services/fednow. Back to text