Two Years To US Real-Time Service FedNow

The platform will operate 24 hours per day, 365 days a year, including holidays and weekends.

The Federal Reserve reached a milestone in the development of its FedNow Service in early August, when it set a phased launch date of 2023 or 2024 for the offering. When it goes live, FedNow participants will be able to send payments intraday via their depository institution accounts and get access to intraday credit the same business day under the same terms and conditions as for other Fed services, according to Fed officials.

The platform will operate 24 hours per day, 365 days a year, including holidays and weekends; depository institutions will report end-of-day balances on their Fed accounting records at the end of FedNow’s business day. The new system will be a direct competitor to The Clearing House’s industry-developed RTP network, which provides real-time clearing and settling of payments and went into operation in November 2017.

While FedNow will introduce choice into the market, it’s also important that the US move foward cohesively toward real-time payments and credit, argues Erika Baumann, senior wholesale banking analyst at Aite Group.

“There are several community banks and credit unions that have recently gone live with The Clearing House’s RTP network, even in the midst of a pandemic,” Baumann says. “Financial institutions of all sizes are finding that they cannot wait until 2024 to go live with real-time capabilities. There is too much opportunity cost as banks that are live are seeing an uptick in volume and interest.”

The Clearing House applauded FedNow’s adoption of the ISO 20022 messaging standard and encouraged the Fed to leverage RTP’s publicly available specifications and operating systems for the platform’s continued development. However, in a blog-post response to the Fed’s announcement, The Clearing House also cautioned that the eventual goal of “interservice message exchange” will be highly difficult, if not impossible, to achieve.