FedNow℠ real-time payments to launch in 2023

The FedNow Service will bring safe and efficient real-time payments (RTPs) to financial institutions of every size and in every community across the U.S., 24/7/365. When a financial institution opts to fully participate in FedNow Service, customers will be able to send RTPs online and recipients will have immediate access to funds.

An RTP rail is the digital infrastructure that facilitates RTPs. FedNow Service will be the first new payment rail in the U.S. since ACH was introduced nearly 50 years ago, long before Same Day ACH, Zelle, Venmo, PayPal, and other services from banks, non-banks, fintechs, and technology giants including Apple and Amazon.

Many consumers and small businesses think they are making RTPs when they use their credit cards or debit cards, digital wallets, or P2P services. However, these are not RTPs. A true RTP moves funds almost instantaneously from one bank account to another so recipients receive payment within seconds of the sending bank initiating the transaction. The receiving bank must make funds available immediately (except where necessary for risk management or legal compliance purposes) and the sending bank cannot revoke or recall a payment once it has been authorized and submitted to the network unless the funds were sent in error. RTP rails also support liquidity management, cash positioning, and financial control for both parties by connecting payments with payment data in a single transaction.

Here’s how FedNow Service will work:

  1.  Sender initiates a payment with its FI.
  2.  Sender’s FI submits a payment message to FedNow Service.
  3. FedNow Service validates the payment message by verifying it meets message format specifications.
  4. FedNow Service sends the payment message to the receiver’s FI to confirm or deny it maintains the receiver’s account.
  5.  Receiver’s FI sends a response to FedNow Service
  6.  If it receives a positive response, FedNow Service debits and credits the designated sender and receiver accounts.
  7. FedNow Service sends a payment message to the receiver’s FI with an advice of credit at the same time it sends an acknowledgement to the sender’s FI, notifying it that settlement is complete.
  8.  Receiver’s FI credits the receiver’s account and makes funds available to the receiver almost immediately.

FedNow Service will adopt the widely accepted ISO® 20022 standard and other industry best practices to support interoperability with a data-rich common “language” that facilitates moving from end-of-day batch processing to RTP processing. The Clearing House’s RTP® network already uses ISO® 20222 and the Federal Reserve’s Fedwire® Funds Service and The Clearing House Interbank Payments System (CHIPS®) are planning to implement it in their systems.

Stay up to date on FedNow Service > https://www.frbservices.org/financial-services/fednow

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