I am excited to attend the FedNow Early Adopter Workshop.1 As the technical testing phase of the FedNow℠ service begins in mid-September, I would like to especially thank the early adopters for the important investments they are making in preparation for the day the FedNow service goes live next year. Together with our partners, we will be ready to launch the FedNow service between May and July 2023 and make this innovative central instant payment infrastructure available to financial institutions of all sizes across America. We’ve worked hard to deliver on time, but ultimately the number of American businesses and homes able to access instant payments will depend on financial service providers making the necessary investments to improve our payments infrastructure. Together we can ensure that all Americans have access to a modern and reliable instant payment system.
The payment system is a critical part of America’s infrastructure that affects everyone. Americans rely on the payment system all day, every day to make purchases, pay bills, and get paid — without ever having to consider the complex infrastructure working under the hood. American households and businesses want and deserve payment transactions that work smoothly, reliably and efficiently.
Fostering a secure, efficient, and universally accessible payments infrastructure has been a core part of the Fed’s mission from the start. Federal Reserve Banks across the country have provided payment and settlement services alongside the private sector for more than 100 years. During this time, we have repeatedly innovated and invested in partnership with the private sector to transform the payment system, using the latest technology to better serve the needs of businesses and households.2 After extensive industry engagement and planning, the Federal Reserve is now on track to deploy the FedNow service in May through July 2023.
The FedNow service will transform the way everyday payments are made across the economy, bringing significant benefits to households and businesses by allowing them to send instant payments anytime, any day and have the funds immediately available to recipients for other payments or for Management available cash flow efficiently. Having funds readily available could be especially important for households that manage their finances paycheck to paycheck or for small businesses with cash flow constraints. The ability to manage money in real time could help households avoid costly late payment fees or free up working capital for small businesses to fund their growth. Indeed, during the pandemic, we have seen how important quick access to funds can be, as many households began issuing emergency aid payments the day they arrived.3
To fulfill the promise of a payment system for the future, the Federal Reserve made a significant commitment to the FedNow platform, which has benefited from the innovative technologies and approaches proven by global technology companies that are essential for today’s always-on digital economy are of vital importance. Our cloud-first design, unique among central bank instant payment services, positions us for the future by enabling not only the throughput and scalability required for high-volume retail transactions, but also broad geographic resiliency points to ensure continuous service to guarantee. The cloud-first design offers other key technology components such as self-healing processes and automation that contribute to operational resiliency. And our development processes are agile, which allows us to deliver new functionality to financial institutions of all sizes faster because they’re 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, the FedNow Explorer resource, the FedNow Community, the Service Provider Showcase, and the FedNow Early Adopter Workshop.4 To further the goal of nationwide instant payment reach, we have worked closely with the private RTP instant payment service on message specifications to ensure alignment to support routing interoperability.
Just as the Federal Reserve has made a significant commitment to our new instant payment infrastructure, we call on industry stakeholders to do the same. Shifting to a real-time payments infrastructure requires a focused effort, but the shift is inevitable. Now is the time for all key stakeholders—financial institutions, core service providers, software companies, and application developers—to commit the resources needed to support instant payments. This means modernizing back-office processes, evaluating accounting practices to align with a seven-business-day week, liaison with liquidity providers, deploying a new customer-facing application, and promoting instant payments for key customer use cases. As the service providers featured at this event will demonstrate over the coming days, parts of the industry have already seized the opportunity to build new services and features that support instant payments. These efforts will increase competition in the end-user services market and encourage innovation – key benefits of delivering the FedNow service as a neutral platform accessible to financial institutions of all sizes across the country.
I would like to personally thank our early adopters. Your input has been vital to our team as they designed and built the service, and the time and energy you put into this effort is important to a successful launch. I encourage other banks and core service providers to join in your commitment to prepare for the launch of FedNow service. I hope that by this time next year we can all have a great sense of accomplishment in our collective effort to transform America’s payments system for the digital age.
1. I am grateful to Kirstin Wells of the Federal Reserve Board for her assistance in preparing this text. The views expressed here are my own and do not necessarily reflect those of the Federal Reserve Board or the Federal Open Market Committee. Back to the text
2. Lael Brainard, “Support fast payments for everyone” (Remarks at 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 the text
4. For information on how to contact FedNow service stakeholders and other resources, see this link: https://www.frbservices.org/financial-services/fednow. Back to the text