Earlier this week, the Federal Reserve Board of Governors narrowed the timetable for the launch of its instant payments platform—FedNow—to mid-year 2023, specifically targeting a production rollout of the service in a May to July 2023 timeframe.  The Fed had previously communicated a 2023 launch.  In September 2022, the FedNow Pilot Program will begin technical testing for the service.

Participants in the FedNow Pilot Program, which currently number more than 120, will complete a certification process to ensure operational and messaging readiness and then move into production once the service is launched.  As the pilot program moves into the testing phase, the Fed plans to engage non-pilot financial institutions and service providers interested in being early adopters of the service.

FedNow is intended to facilitate nationwide reach of instant payment services by financial institutions – regardless of size or geographic location – on a 24/7/365 basis.  Through financial institutions participating in FedNow, businesses and individuals will be able to send and receive instant payments at any time of day, and recipients will have full access to funds immediately.  FedNow is expected to be particularly appealing to smaller and mid-sized financial institutions that need an entre-point to instant payments platforms.

The Clearing House launched its Real Time Payments (RTP) network in November 2017 and is currently the only RTP rail servicing the United States.  The Fed’s entry into the real-time payments space could mean more opportunities for participants in the U.S. payments ecosystem to allow them access to real-time payments for a variety of use cases, from real-time access to wages for gig workers to a transformation of treasury and payroll services for corporations and increase overall certainty in payments.

In remarks about the Fed’s narrowed launch timetable, Federal Reserve Vice Chair Lael Brainard stated that “[t]he time is now for all key stakeholders — financial institutions, core-service providers, software companies and application developers — to devote the resources necessary to support instant payments.  This means upgrading back-office processes, evaluating accounting procedures to accommodate a seven-business-day week, arranging liquidity providers, deploying a new customer-facing application and promoting instant payments for key use cases to customers.