FedNow is continuing to gain traction after its launch in July, with roughly 108 organizations now sending and receiving on the network.
Earlier this month, Michael S. Barr, Vice Chair for Supervision at the Fed, revealed that FedNow will see steady growth stating:
“While current volumes on FedNow are small, I expect that participation will grow over time and be a significant addition to, and advance on, the existing payments infrastructure,” he said. “But decisions on how widely available the service will be rest with financial institutions. We have provided the rails. Innovation by private depository institutions will determine whether these services reach a broad range of households and businesses.”
Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, agrees and also expects to see more developing in the coming months.
“We anticipate widespread adoption and ubiquity will build over time, bringing the benefits of instant payments to communities nationwide and improving the way households, businesses and governments send and receive payments,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive in a press release.
“RTP has currently has over 370 FI participants, which might seem like a small fraction of the nearly 10,000 U.S. banks and credit unions,” she said. “However, RTP’s network currently reaches 65% of U.S. DDAs.”
FedNow Is Here … What’s Next?
There’s no time like the present for financial institutions to leverage FedNow to help modernize their current payment systems. But before FIs jump on board, they need to consider a few factors.
FedNow offers a plethora of advantages that any company would like to have, but it’s certainly not a one-size-fits-all solution. Financial institutions, especially, should begin by looking to their customers—are they a small bank or a large bank, for example.
“Some of the smaller financial institutions feel more comfortable working with a payment system that’s offered by the central bank because they think it’s more objective,” Tavilla said. “They don’t want to work with or offer products on a solution that’s offered by their large competitors.”
Smaller financial institutions also rely heavily on the partnerships they have with service providers. Therefore, looking to implement a new service would greatly depend on the availability and timelines of their service provider partners.
Overall, Tavilla recommends that financial institutions first determine which solutions make the most sense for their own operations.
“The key is to look internally at your organization and what you need and what makes sense,” Tavilla said. “Overall real-time payments are important and here to stay. For the first time in 40 years, you have technology that can move money in real-time, which is a critical fundamental component. It’s just a start.”
“You need to find solutions, or you can develop products that you know leverages or takes advantage of this capability,” she said.
