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Since the FedNow® Service launched in July, there’s been a lot of excitement about this new payment infrastructure. Do you know all the facts? Read on to learn what the FedNow Service is and isn’t, and what you can expect from the service in the months and years ahead.
The Federal Reserve’s goal and expectation is that the FedNow Service will achieve broad reach over time, much like its Fedwire® Funds Service and FedACH® Services. A variety of participating financial institutions are currently live on the service, including those serving as settlement and liquidity providers. TheFedNow Service will continue to partner with the industry and payments ecosystem to grow the network of participating financial institutions, with the goal of broadly reaching American consumers and businesses to help them take advantage of the benefits of instant payments.
Many of the faster and mobile payment services in the market today are consumer-facing products used to send and receive payments. Funds sometimes clear immediately, but the timing of interbank settlement between the financial institutions involved depends on the underlying rail used. In contrast, the FedNow Service operates on the back end to clear and settle all payment transactions immediately on a transaction-by-transaction basis, reducing credit risk for financial institutions. Joining the FedNow Service also may allow financial institutions to innovate and enable new use cases for their members.
Fraud is not new or unique to payments, but the speed and irrevocability of instant payments can produce unique challenges. As more financial institutions prepare to adopt the FedNow Service, it’s important they evaluate and extend their own layered approach to fraud management and consider steps to further protect themselves and their members. The FedNow Service launched with features such as transaction limits and negative lists to support financial institutions with their own fraud mitigation efforts. Fraud tools available to participants are expected to expand over time as adoption grows and fraud threats change.
The FedNow Service does not provide an end-user interface or application that financial institutions can use with their own members. The FedNow Service is a payment infrastructure that financial institutions can leverage to build and offer their own instant payment solutions to their members.
For more facts about the FedNow Service, visit FedNowExplorer.org.