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The US Federal Reserve targets support for all aspects of the economy as it pins down a go-live date for its new instant payments service.
The US central bank has settled on a July date for the launch of its new FedNow service.
The instant payment service will first launch with a set of core clearing and settlement functionality and value added features. Over time, it will add more features and enhancements in future releases, the Fed says.
"With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible," said Tom Barkin, president of Richmond Fed and FedNow Program executive sponsor.
The Fed will begin the formal certification of participants for the launch of the service in the first week of April.
Early adopters will have to complete a customer testing and certification program, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system.
The certification involves a comprehensive testing curriculum with defined expectations for operational readiness and network experience.
In June, the Fed and certified participants will carry out production validation activities to confirm readiness for the July launch.
"We couldn't be more excited about the forthcoming FedNow launch,” said Ken Montgomery, first vice president of the Boston Fed and FedNow program executive.
"With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service."
According to the release, a diverse mix of financial institutions of all sizes, the largest processors and the US Treasury have signalled their intent to start using the service as early as July.
According to Barkin, "the launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy".
Although FedNow is designed to facilitate payments both between individuals and businesses, one of its key use cases is to modernise business-to-business (B2B) transactions, which still heavily rely on manual processes to send and receive payments and payment information.
Additionally, it is expected to significantly ease bill payments, which still often involve costly cheque payments. According to the Fed, two-thirds of the total 14bn cheques written in 2018 were B2B and consumer-to-business (C2B) payments, and 90 percent of these were for bills.
The rollout of FedNow will complement The Clearing House’s (TCH) RTP instant payment system, which has so far registered a slow take-up. Last November, on the fifth anniversary of RTP, the TCH revealed that the bank-owned instant payment service handled only 45m transactions worth $19.7bn in the third quarter of 2022.
FedNow is expected to significantly expand the availability of instant payments across the US by enabling smaller institutions to participate in it. According to the Fed, its FedLine network, which will include FedNow once it is launched, has more than 10,000 direct and indirect participants.
Nonetheless, under the current rules, only banks can get direct access to the central payment infrastructure despite several fintech groups pushing for widening the scope of direct participants.
