The idea of instant payments isn’t new; in 2017 The Clearing House’s system, RTP (Real Time Payments), went live. Since then, it has steadily grown in demand. In response, the Federal Reserve Bank (the Fed) recently announced their new instant payment infrastructure, FedNow, is live.
The FedNow initial release will include optional features like fraud prevention tools, the ability to join initially as a receive-only participant, request for payment capability, and tools to support participants in their handling of payment inquiries. Additional features and service enhancements will be introduced over the coming years. The Federal Reserve plans to make FedNow available to all Americans as it continues to expand and develop more features and services.
In addition to functioning like and offering the same benefits as The Clearing House’s RTP, FedNow will also allow banks to connect to their master account at the Federal Reserve. There are a few other differences, mostly coming down the default transaction limit for FedNow being $100,000 with the participating financial institution having the option to request up to $500,000. With RTP, on the other hand, the transaction limit is $1 million. Right now, it is unknown if the Federal Reserve will adjust the limit to match that of RTP.
The FedNow service enables individuals and businesses to send immediate payments through their participating depository institution. FedNow is designed as a neutral platform that can support a variety of instant payments and allows the service providers something they can build on in order to offer other value-added services.
The Fed is hoping this will direct more of these instant payments back through their processing systems. Perhaps leading them to develop other forms of instant payment – like a crypto currency.
So what does this mean for you? If your bank is participating in the FedNow program you or your business will be able to send and receive money in real-time. The current cost for this service is a fee of $.045 per transaction, to be paid by it’s sender, and a fee of $.01 for a request for payment message, to be paid by the requester. The Fed has published a list of banks and credit unions that are currently using the FedNow system, which you can find on our website here: www.yieldfa.com/FedNowBanks.