The Federal Reserve's long-anticipated instant payments system will go live in July, the central bank announced Wednesday.
Last August, the Fed
Once live, FedNow is expected to expand access to instant payments clearing to a broader selection of banks and financial institutions.
Currently, the only option for providing instant payments in the U.S. is through The Clearing House, a payment processing company owned by several of the largest banks in the country. The Clearing House launched its real-time payments network, known as RTP, in 2017.
"With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible," said Tom Barkin, president of the Federal Reserve Bank of Richmond and FedNow Program executive sponsor. "The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy."
In the run-up to the launch, the Fed will open a certification program next month to prepare prospective participants to send transactions through the system. This will include a comprehensive testing to ensure parties are operationally prepared to connect with the new payments network.
Criteria for the certification program will be determined by findings from the Fed's pilot program, which began last September with roughly 120 participants. Groups certified this spring will be put through another round of validation exercises starting in June, the Fed announced.
The Fed said "many early adopters" have expressed interest in joining the service when it goes live in July, including "a diverse mix of financial institutions of all sizes, the largest processors, and the U.S. Treasury."
Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, said in a statement that widespread adoption of the system is expected to be gradual, taking place over the rest of 2023 and into future years. He added getting a large number of participants connected to the system is "key to increasing the availability of instant payments for consumers and businesses across the country."
Montgomery urged banks and other firms interested in FedNow to start taking steps to prepare for its rollout.
"We couldn't be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution," Montgomery said in a written statement. "With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service."
Currently, the U.S. lags behind many other developed countries in the availability of instant payments. Some academics and advocates say the country's antiquated systems, which require two or three days to clear most transactions, have a negative
