Tuesday, July 18, 2023

Countdown To The Federal Reserve's FedNow Going Live

From PYMNTS.com, July 17:

FedNow’s Future and What the Triple Clock Theory Says About It  

Four days from today, the Federal Reserve’s instant account-to-account payments rail will go live. FedNow’s launch on July 20 will bring the number of real-time rails in the U.S. to two. The first real-time rail to go live was RTP®, operated by The Clearing House, in 2017.

Judging by the barrage of press releases and PR pitches received by PYMNTS over the last several weeks, the launch of FedNow is to payments what the Red Sox winning the World Series in 2004 after an 86 year drought was to baseball: an historic milestone that was a long time in coming.

In many ways, July 20 begins the countdown to ubiquitous instant account-to-account payments in the U.S. TCH with RTP® has been live for six years and counts 274 financial institutions and 65% of U.S. deposits connected to its rail as important milestones of its own. But as even TCH and its member banks will admit, traction around use cases has been scattered, the number of transactions low. TCH with RTP® hasn’t yet achieved the critical mass needed to ignite its payments platform. The introduction of FedNow creates competition for RTP® volume and potentially the real-time payments infrastructure for new use cases like merchant payments.

In addition to the U.S. Treasury, FedNow says that 56 “Early Adopters” are certified and ready to move money over its rails at launch. The profile of those early adopters leans heavily to small FIs — 41 of the 56 are FIs, many with profiles like 1st National Bank of Yuma, Buffalo Federal Bank and Consumers Cooperative Credit Union with assets of $550M, $174M and $2.8B respectively — even though four TCH founding members, J.P. Morgan, Wells Fargo, US Bank and BNY Mellon, are also ready to roll on Thursday. There are fifteen technology providers like Adyen, Fiserv, FIS, Jack Henry, Finastra and ACI that banks and FinTechs can use to connect to the FedNow rails.

So, it seems, the race for instant payments in the U.S. is on....