Friday, May 27, 2022
More than 120 organizations, primarily financial institutions, have signed up for the pilot. One notable non-FI participating is Square Financial Services Inc., which the Fed said “satisfied pilot criteria surrounding instant payments readiness.”
The Fed plays a pivotal role in the nation’s payments system by facilitating the clearing and settlement of transactions between FIs, from the largest to the smallest, and their clearing agents. But the Fed’s clearing and settlement apparatus only operates from 9:00 a.m. to 7:00 p.m. Eastern, Mon. through Fri., and not on national holidays.
FedNow will bring the Fed’s interbank clearing services into the 21st century, with the ability to support some payments in real time, 24/7/365, providing payees with immediate and full access to funds. Initially, at least, only credit transfers (sometimes called credit-push transactions) valued at $500,000 or less will be supported. Support for higher-value transactions, as well as debit-pull payments (where receivers request funds be pulled from a payer's FI account) will be phased in over time, the Fed said.
“The FedNow service pilot participants, including financial institutions of all sizes, processors and correspondents, have been working hard at every step of this journey,” said Nick Stanescu, senior vice president for the FedNow service. “Though much work remains, this progress sets the stage for thousands of financial institutions to be up and running with instant payments in the near future, including those that work with third-party payment providers.”
In a related development, the Fed just released survey results suggesting a majority of consumers (80 percent) are interested in using faster payments options to pay businesses. About 70 percent of respondents said having access to faster payments from their FIs is an important satisfaction driver.
The term “faster payments” encompasses instant payments, as well as other initiatives, like same-day ACH, push-to-card credits to payee debit cards, which occur within minutes of payments being initiated, and digital wallet payments, which look and feel like instant payments on the front end, but can take hours or days for funds to be transferred to payee FI accounts for use outside the app’s network.
Demand for faster payments spans age groups and has intensified in the wake of the COVID-19 pandemic, according to the survey. Person-to-business payments top the list of likely use cases for faster payments (with 77percent of consumers surveyed) followed by person-to-person and account-to-account payments, both of which were cited by 62 percent of respondents.
These findings align with those of a business survey the Fed conducted in early 2021, which showed nine out of 10 businesses expected to be making and receiving faster payments within three years.
Here are additional insights gleaned from the Fed’s consumer survey, which queried just over 2,000 consumers during the second half of 2021.
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