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Payments Executive Brief Issue 1: For a printable PDF of this issue, click here.
To support faster payments in the U.S., the Federal Reserve announced that it will develop a new 24x7x365, real-time payment and settlement service called FedNow. This new Service will complement existing private-sector faster payments services to help establish a safe and efficient nationwide infrastructure supporting the faster payment demands and expectations of today’s businesses and consumers.
The FedNow Service will process and settle payments within seconds, 24 hours a day, seven days a week, 365 days a year. It is expected to be available as early as 2023, with enhanced components and functionality becoming available incrementally once the Service is operational.
At initial launch, the Service will:
While details are being finalized, FedNow Service fees are expected to be based on a per-item and fixed participation fee structure. (The Federal Reserve Board will announce the specific fee structure closer to the launch of the FedNow Service.)
The Federal Reserve is currently soliciting feedback on the key features and functionality of the FedNow Service planned for launch as well as enhancements that could become available after launch.
The Federal Reserve’s development of the FedNow Service provides the opportunity for all banks—both large and small—to capitalize on the value of faster payments and brings significant benefit to community banks and the businesses and consumers they serve.
While the FedNow Service presents significant benefits to community banks, adoption of the Service could require changes or updates to current systems or processes. Some considerations for community banks include:
Although not exhaustive, these considerations should be contemplated as community banks establish or advance their faster payments plans.
The launch of the FedNow Service is still potentially four years away, but community banks should begin preparing now to make sure they can take full advantage of the system once it is available. For example, community banks may want to:
ICBA is here to help community banks navigate the evolving faster payments landscape. In the near term, ICBA will respond to the Federal Reserve’s Request for Comment on the FedNow Service and encourage community banks to leverage our response in crafting their own individual responses.
ICBA will also provide talking points to the Federal Reserve’s Request for Comment to help you submit comments directly to the Federal Reserve if you so desire.
Additionally, ICBA will continue to develop and share additional resources around faster payments and the FedNow Service to help community banks maximize the opportunity that faster payments through FedNow presents. And we will continue to be here to help ensure community banks can leverage faster payments to meet the needs of their customers.
For more ICBA Payments tools, courses and resources, click here.
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