I am excited to participate in 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 significant investment they are making to prepare 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, making this innovative core instant payments infrastructure available to financial institutions of all sizes across America. We’ve worked hard to deliver on time, but ultimately the number of US businesses and households that have access to instant payments will depend on financial services firms making the necessary investments to upgrade our payment 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 the American 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 that works under the hood. American households and businesses want and deserve payment transactions that work seamlessly, reliably and efficiently.
Promoting a secure, efficient and widely accessible payment infrastructure has been a central part of the Fed’s mission from the beginning. The Federal Reserve Banks across the country have provided payment and settlement services alongside the private sector for more than 100 years. During that period, we have repeatedly innovated and invested in partnership with the private sector to transform the payment system, using the latest technology to better meet the needs of businesses and households.2 Now, after extensive industry involvement and planning, the Federal Reserve is on track to provide the FedNow service from May to July 2023.
The FedNow service will change the way daily payments are made across the economy, enabling households and businesses to reap significant benefits from the ability to send instant payments anytime, any day, and the money instantly available to recipients. to make other payments or manage money flow efficiently. Immediate availability of funds can be especially important for households who manage their finances from paycheck to paycheck or for small businesses with cash flow constraints. The capacity to manage money in real time allows households to avoid expensive late payment fees or free up working capital for small businesses to fund growth. During the pandemic, we have seen how essential quick access to funds can be, as many households started dispensing emergency aid on the day they were received.3
To deliver on the promise of a payment system for the future, the Federal Reserve has made a substantial commitment to the FedNow platform, which has benefited from the innovative technologies and approaches proven by global tech companies that are vital to the ever-changing world. active digital economy today. Our cloud-first design, unique among central bank instant payment services, positions us for the future by providing not only the throughput and scalability needed for large-scale retail transactions, but also broad geographic resilience to ensure continuous service. Cloud-first design provides other key technology components, such as self-healing processes and automation, that contribute to operational resilience. And our development processes are flexible, allowing us to deliver new features faster to financial institutions of all sizes, as they are ready to adopt them based on their priorities.
We have also invested heavily in stakeholder engagement to ensure the service is ready for adoption 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 achieve the goal of nationwide reach for instant payments, we worked closely with the private RTP instant payment service to message specifications to provide reconciliation to support routing interoperability.
Just as the Federal Reserve has made a substantial commitment to our new instant payments infrastructure, we are calling on industry stakeholders to do the same. The shift to real-time payment 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 allocate the resources needed to support instant payments. This means upgrading back office processes, evaluating accounting procedures for a seven business day a week, arranging liquidity providers, implementing a new customer-facing application, and promoting instant payments for key use cases to customers. As the service providers at this event will show in the coming days, parts of the industry have already seized the opportunity to build new services and capabilities that support instant payments. These efforts will increase competition in the end-user services market and foster innovation – the key benefits of offering 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. The input you have provided has been instrumental 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 would like to call on additional banks and core service providers to join your commitment to prepare for the rollout of the FedNow service. By this time next year, I hope we can all feel a great sense of accomplishment in our concerted effort to transform the U.S. payment system for the digital age.
1. I am grateful to Kirstin Wells of the Federal Reserve Board for her help in preparing this text. The views expressed here are mine and do not necessarily reflect those of the Federal Reserve Board or the Federal Open Market Committee. Back to text
2. Lael Brainard, “Supporting Fast Payments for All” (comments to 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, Dec. 18, 2020). Back to text
3. Lael Brainard, “The Future of Retail Payments in the United States” (comments to the FedNow Service Webinar, Washington, DC, via webcast, Aug. 6, 2020). Back to text
4. Information on reaching FedNow Service stakeholders and other resources can be found at this link: Back to Text