What is the FedNow Service?
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FedNow Service is a new instant payment infrastructure developed by the Federal Reserve that allows financial institutions of every size across the U.S. to provide safe and efficient instant payment services. Through financial institutions participating in the FedNow Service, businesses and individuals can send and receive instant payments in real-time, around the clock, every day of the year. Financial institutions and their service providers can use the service to provide innovative instant payment services to customers, and recipients will have full access to funds immediately, allowing for greater financial flexibility when making time-sensitive payments.
When will the FedNow Service launch, and what features will be available?
What is ISO 20022, and what role does it play in the FedNow Service?
The Federal Reserve will take a phased approach to the FedNow Service. The initial soft launch was on July 20, 2023, and focused on core functionality to meet market needs and help financial institutions transition to 24x7x365 operations.
ISO 20022 is a financial industry messaging standard which provides a universal language for global systems and networks to communicate with each other. The FedNow Service will introduce messages to instruct customer credit transfers, requests for payment, and interbank liquidity transfers, as well as FedNow system and account reporting messages.
What are the benefits of the FedNow Service? The FedNow Service expects to provide the following public benefits through its instant payment infrastructure:
What resources is FedNow making available to help smaller organizations implement the ISO 20022 specifications?
Safety — resiliency through redundancy and the Federal Reserve’s role in times of crisis Efficiency — healthy competition with the private sector Accessibility — the ability to reach the nation’s more than 10,000 diverse depository institutions
We are in the process of developing ISO 20022 education programs for business and technology specialists, along with testing opportunities that will be made available through the MyStandards portal. These programs will help your organization prepare for FedNow Service implementation, whether you are using in-house solutions or an outsourced arrangement with a service provider such as a core processor.
How will the FedNow Service compare to other faster payment services already in the market?
Is the FedNow Service replacing cash? Is it a central bank digital currency?
The growing demand for instant payments has driven the creation of several faster payment systems, but some differences exist. Some are closed-loop systems (PayPal, Venmo, Square’s Cash App), others are open-loop (VisaDirect, MasterCard Send, Zelle, RTP, etc.), and some settle payments between financial institutions on a deferred basis, while others settle in near real-time.
The FedNow Service is a payment service the Federal Reserve is making available for banks and credit unions to transfer funds for their customers. The FedNow Service is neither a form of currency nor a step toward eliminating any form of payment, including cash.
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What are the incentives for individual users to adopt instant payments? Through financial institutions’ participation in the FedNow Service, businesses and individuals will be able to send and receive instant payments conveniently, for example, using mobile devices. Recipients will have full access to funds immediately, giving them greater flexibility to manage their money and make time-sensitive payments. The ability to have full access to funds immediately is especially important in times of crisis.
For any questions and to keep you up to date with the latest FedNow Service updates, please visit www.frbservices.org.
