The FedNow® Service provides opportunities for U.S. financial institutions of a variety of sizes to build and deliver new instant payment services that can improve customer experience, loyalty, and satisfaction. Instant payments made over the FedNow Service settle between financial institutions in real time, and end users have access to funds immediately. Download the FedNow product sheet for details about the service and the benefits of instant payments.
If your financial institution is interested in the FedNow Service but has questions about service features and functionality as you consider adoption, check out the following answers to commonly asked questions.
1. What use cases are supported by the FedNow Service?
The FedNow Service offers core clearing and settlement capabilities that support a broad range of use cases. Financial institutions can use the FedNow Service to develop and deliver account-to-account, bill pay and many other offerings that enable their customers to instantly:
• Reimburse employee expenses
• Provide payroll or incentive pay
• Transfer funds between accounts at separate financial institutions (me-to-me transfers)
• Pay bills either as a one-time or recurring payments
• Reload prepaid cards
• Pay suppliers for inventory, services and rent
• And much more
For more information, view the FedNow use case overview and product planning resource.
2. How does the FedNow Service payment process work?
With the FedNow Service, a payment clears and settles instantly, but there are several steps that take place between the sending and receiving financial institutions, their service providers, the FedNow Service and end users. Get a step-by-step view of this process in this short video and download the customer payment flow resource for more details.
3. What are the options for participating in the service?
Participation in the FedNow Service is flexible when it comes to participation types, connectivity to the service, settlement arrangements and use of service providers. Participant expectations for the FedNow Service depend on how each organization participates. For more information, please refer to Operating Circular 8, the corresponding Operating Procedures (Off-site), the FedNow Service ISO 20022 specifications, and the FedNow Service Readiness Guide.
4. What fraud mitigation tools does the FedNow Service have?
Financial institutions continue to serve as the first line of defense against fraud through services they provide to their customers. To help mitigate fraud, the FedNow Service understands the importance of a safe payment infrastructure for instant payments, with features to support payment integrity and data security. To support and complement your financial institution’s own fraud mitigation efforts, the FedNow Service offers capabilities and enables security features to help protect against threats. Read more about FedNow Service fraud management tools and steps your financial institution can take to strengthen your defenses.
5. How do financial institutions connect to the FedNow Service?
To simplify the adoption process and make the FedNow Service as accessible as possible, financial institutions can use the FedLine Advantage®, FedLine Command® and FedLine Direct® Solutions to connect to the FedNow Service, similar to the way they connect today to other Federal Reserve Financial Services. Fees associated with these FedLine Solutions follow the published fee schedule, including fees related to adding discretionary FedLine VPN or WAN routers as needed to meet individual institution needs. Financial institutions can connect directly or they may choose to connect through a service provider — learn more about connecting to the FedNow Service.
6. How does settlement occur?
FedNow Service payments settle in the participant’s Federal Reserve Bank master account or that of their designated correspondent. Consistent with the account structures for other Federal Reserve Financial Services, participating institutions use primary and secondary routing transit numbers (RTNs) within messages to segregate payment activity for reporting purposes, althoughsettlement occurs at the master account level. Learn more about settlement.
7. What is ISO® 20022 and what role does it play in the FedNow Service?
ISO 20022 is a financial industry messaging standard, which provides a universal language for global systems and networks to communicate with each other. The format enables rich-data exchanges, efficient end-to-end straight-through payments processing, and interoperability with other payment systems, and is a logical choice for the FedNow Service.
Whether you’re responsible for your organization’s FedNow Service integration, preparing to build instant payment products leveraging the FedNow Service, or are a payments processor that will help your clients connect to the FedNow Service, now is the time to familiarize yourself with the FedNow ISO 20022 message specifications. Read ‘What is ISO 20022 and why does it matter?’ for an overview of ISO 20022 messages and how to access the FedNow ISO 20022 messages specifications.
8. How should my financial institution think about reporting and reconciliation activities with the FedNow Service?
The Federal Reserve Banks provide a variety of report options to participating financial institutions to support reconcilement and general ledger posting functions. These reports include a range of FedNow Service activity and accounting reports. As financial institutions determine their internal procedures to accommodate FedNow Service activity, they can choose from account reconciliation options and a report schedule that fits their needs.
9. Which providers support the FedNow Service?
Your financial institution may be considering whether to work with service providers to implement the FedNow Service. The FedNow Service Provider Showcase is a one-stop resource you can use to browse and find providers that might be right for you. Visit the showcase to view provider profiles and connect with them.
10. Where can financial institutions locate information about Operating Circular 8 (OC 8)?
Financial institutions can learn more about FedNow Service Operating Circular 8 and related Operating Procedures on FRBservices.org and via this on-demand webinar.
11. How can financial institutions get ready for the FedNow Service?
The time to start preparing for the FedNow Service is now and there are resources to help, including:
To find these resources and many others to help you learn about instant payments and get ready for the FedNow Service, visit FedNowExplorer.org. Sign up to receive regular FedNow News emails.
Ready to take the next step in your FedNow Service adoption journey? Reach out to a Federal Reserve Bank account executive.
Not quite ready? Let ePayAdvisors perform an operational analysis to get you started in instant payments on the right foot.
Want to learn more? Attend ePayConnect 2024 to network with peer institutions and industry experts and learn from sessions like FedNow Onboarding Best Practices, with a panel featuring Phil Sprague, Head of Industry Readiness and Client Onboarding, Federal Reserve Bank.
Have questions right now? Ask ePayResources on the Payments Answerline™ at 800-475-0585, Option 1.