Aug 22, 2023
FedNow aims for late end of launch period
The Fed’s announcement comes as the central bank is grappling with turmoil in
The Fed's announcement comes as the central bank is grappling with turmoil in the banking industry touched off by recent regulatory takeovers of Silicon Valley Bank and Signature Bank.
Despite depositor and investor fears rippling through the banking industry, the Fed will plunge into arguably the most ambitious new payments initiative taken on by the federal government in decades.
The Federal Reserve had said previously that it would launch FedNow as early as May and no later than July. Wednesday's details about timing make clear how it will proceed in unfurling the new system after years of planning.
The Fed had said last August that it would begin "technical testing" of the new instant payments system last September as part of an ongoing pilot program.
The companies that intend to go live in July include some of the largest payments processors, as well as financial institutions of all sizes, the Fed said in its release. A spokesperson for the Fed didn't immediately respond to a request to identify the companies involved. The U.S. Treasury will be included in the new system from the get-go, the Fed release noted.
The question remains as to what extent banks nationwide will decide to use the Fed's new real-time payments system. A similar, privately-operated real-time payments service, offered by the nation's biggest banks, has been slow to gain traction.
Some companies, including the payments processors ACI Worldwide and Jack Henry & Associates, have already declared their readiness to aid in the launch of the government's new system.
The Fed is apparently verifying such companies will be prepared. "Certification encompasses a comprehensive testing curriculum with defined expectations for operational readiness and network experience," the release said.
For its part, the Federal Reserve banks are eager to catch up to other countries that have already expanded their real-time payments systems with widespread use.
The Fed acknowledged in the release that there will be more work to be done and that the July launch is just a first step, saying it will continue working with service providers to "implement the service throughout 2023 and beyond."
"Growing the network of participating financial institutions will be key to increasing the availability of instant payments for consumers and businesses across the country," Ken Montgomery, the Fed executive heading up FedNow, said in the release.