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FedNow could innovate the

payments ecosystem

their shifts. This extends to freelancers and gig workers
who are paid when they complete their work. Having
the capability to pay workers instantly provides a
competitive edge to organizations that use instant
payments compared to those that still use the ACH.
• Digital wallet unloads: A drawback to digital wallets is
that they aren't always efficient or fast for consumers to
unload funds. Instant payments alleviate this concern
by allowing wallet holders to withdraw money right
away. Instant unloads have become widely adopted
in a short period of time as evidenced most notably in
gaming where they went from proof of concept to table
stakes in around 18 months.
• Government payments: FedNow is being used
for government disbursements via the Treasury
By Dean Nolan Department's Bureau of Fiscal Services, which
SRM supports payments for 22 government agencies. Banks
and credit unions receiving FedNow payments can get
hough instant payments have been on the radars these needed government payouts to their customers
of financial institutions since The Clearing House two to three days faster than their competitors who are
introduced the RTP Network six years ago, not receiving instant payments.
T last summer's launch of the Federal Reserve's
FedNow Service changed the question from, will instant As value propositions begin to evolve, other industries are
payments will become prevalent? to when will instant pay- starting to incorporate instant payments into their business
ments become a core part of the U.S. payments ecosystem? models. One such industry is real estate. When closing a
real estate transaction, the law requires immediate and
The answer hinges in the short term on when banks and final payment to all participants. As a result, most real-
credit unions commit to receiving instant payments and estate payments are done by wire transfer, which is one of
then in the longer term on when they begin to originate the more expensive forms of payment.
instant payments and request for payments on behalf of
their consumer and commercial customers. This includes an estimated 10% of real estate closing
payments which are under $10 (with many only for $.01 or
Use cases and value propositions to drive strategy $.02). Since the ACH provides neither immediate nor good
Instant payments are unique, providing 24/7 availability, fund payments, there were no other options available until
instant settlement, irrevocability and enhanced data. With instant payments came along and provided a far more
around-the-clock access, consumers and businesses can efficient method of settling the small ticket payouts as
make payments exactly when they need to be made. On well as many other payments associated with real estate
the other side of the ledger, irrevocability allows recipients transactions.
of instant payments to immediately use the money they've
received without fear of recall or dispute. Additionally, through the use of payment requests,
instant payments are poised to change the entire closing
Finally, both senders and receivers are provided with experience by supporting payouts to occur in real time
immediate confirmation of the payment, alleviating from the closing table.
uncertainty of the status of the payment. In the payments Instant payments poised to drive significant change
ecosystem, these value propositions have enabled banks
and credit unions to better meet the needs of their customers The disruption caused by instant payments in payroll and
and members by enabling use cases not well-supported by digital wallets, and the pending changes in real estate and
current payment modalities. Some of these have included. other industries, are just the tip of the iceberg. However,
with any innovation that bursts onto the scene, there is a
• Earned wage access: A new form of payroll that tendency to believe that legacy solutions will be phased
enables employers to pay their employees at the end of out.

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