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Of the now 900 financial institutions on the FedNow real-time payments network, 78% of them are community banks and credit unions, the Federal Reserve says. The 900 figure, found in updated data released on the FedNow Web site, comes as the instant payment service marks its first year of service. It launched last July with 35 financial institutions.
And the number of FedNow service providers has doubled in the period, from 16 to 32. The Fed also says participating banks and credit unions range in asset size from less than $500 million to more than $3 trillion, with participants in all 50 states.
The Fed announced in 2019 it would build a real-time payments network. Reaching more than 9,000 U.S. financial institutions was one of FedNow’s primary goals, especially as it sought to extend instant payments availability. “No private-sector provider has ever achieved 100% reach,” Lael Brainard, then a Federal Reserve governor, said at the time. “The Fed already has invested in connections with nearly every bank across the country. We’re uniquely positioned.” Brainard is now the director of the National Economic Council.
“While we’re still early on the road to instant payment ubiquity, we are working with the industry toward the ultimate goal of making instant payments available to individuals and businesses in every part of the country,” Mark Gould, chief executive payments officer at Federal Reserve Financial Services, which oversees FedNow, says in a FedNow post.
Not only is connectivity vital to real-time payments, but use cases have to be in place for consumers, merchants, and financial institutions to want to use instant payments, experts say. In the same post, the Fed says use cases gaining traction include digital wallet funding and defunding, instant payroll, bill payment, real estate transactions, microdeposit account verification, and online marketplace seller payouts.
In addition to adding more participants and developing use cases, FedNow executives also plan two new risk-management tools expected to become available in 2024 and 2025. Application programming interface code also will be available in 2025 to enable FedNow users to exchange information with the service.
FedNow is the second U.S. real-time payments network, following the 2017 debut of the RTP network from The Clearing House Payments Co. LLC. New York City-based TCH is owned by many of the largest U.S. banks.
