The Federal Reserve has announced the launch of the FedNow Service, a new product that will allow money to be sent and received instantly irrespective of the recipient location in the country.
In a press release on the 15th of March 2023, the Federal Reserve revealed that the FedNow Service will commence operations in July. In addition to this, the Federal Reserve also shared details on preparations for the launch.
As a prequel to the launch, starting from the first week of April 2023, the Federal Reserve will start the official certification process for participants in the service launch. Early adopters will undergo a customer testing and certification phase to get ready to send live transactions through the system, which will be informed by feedback from the FedNow Pilot Program.
With clear requirements for operational preparedness and network experience, certification includes a thorough testing curriculum. Activities for production validation will be carried out in June by the Federal Reserve and certified participants to ensure launch readiness in July.
Speaking on this, the VP of the Federal Reserve Boston who also doubles as FedNow executive, Ken Montgomery expressed the team’s excitement about the upcoming launch. Ken claims that by doing this, every partner financial institution—from the tiniest to the largest—from every region of the country will be able to provide a cutting-edge fast payment solution. Appealing to financial institutions, “we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” Ken added.
The U.S. Treasury, the largest processors, and a variety of financial institutions of various sizes are among the many early adopters who have stated their intention to start using the service in July.
Along with preparing early adopters for the debut in July, the Federal Reserve is still working with a variety of financial institutions and service providers to finish the testing and certification program and execute the service through 2023 and beyond. Ken pointed out that the service’s availability is just the beginning and that expanding the network of collaborating financial institutions will be crucial to enhancing the accessibility of quick payments for customers and companies nationwide.
Shedding more light on the FedNow service, the blog post explained that a complete set of essential clearing and settlement functions will be available when the FedNow Service launches. Future updates will include more features and improvements to support the industry’s continued growth and expansion of the FedNow network, as well as its need for safety, resilience, and innovation.
Tom Barkin, president of the Federal Reserve Bank of Richmond who is also the executive sponsor FedNow Program stated that theFedNow Service is a cutting-edge payment system that the Federal Reserve is developing to be accessible, adaptable, and robust. According to him, the launch represents a significant step forward in the effort to support practically every sector of the economy by helping financial institutions better meet customer demand for rapid payments.
What is FedNow Service
The FedNow Service is being developed by the Federal Reserve Banks to enable financial institutions, regardless of size or location, to offer fast payment services nationwide, around-the-clock, every day of the year. Businesses and individuals will be able to send and receive instant payments through financial institutions taking part in the FedNow Service at any time of day. Recipients will have full access to funds right away, giving them more flexibility to manage their money and make time-sensitive payments. Access will be offered through the FedLine network of the Federal Reserve, which provides services to more than 10,000 financial institutions either directly or through their agents.
