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February 20, 2023

FedNow moves closer to implementation every day and The Bankers Bank continues to participate in testing and preparation.

Here are some things we know:

  1. FedNow is a new and innovative product that could provide a competitive advantage and create a new revenue source for your financial institution.
  2. Your financial institution can participate directly with the Federal Reserve or through your existing correspondent relationship with The Bankers Bank.
  3. FedNow is a good funds model with immediate settlement and immediate funds availability.
  4. FedNow is credit only, domestic only, final, and irrevocable payment.
  5. Your financial institution has options for participation. You may receive only, send and receive, or you may choose not to participate.
  6. FedNow uses ISO20022, a global standard messaging format. This is not ACH, not wire transfer and not a card rail.
  7. FedNow is a 24/7/365 product but that does not mean you need staff available for monitoring.
  8. All payment types will be supported: A2A; P2P; B2B; C2B; B2C.
  9. Rules and Regulations are available; Regulation E; Regulation J (amended); Federal Reserve Operating Circulars 1, 5 and 8; UCC4A.
  10. Resources for training and education are available on the Federal Reserve site.

What could/should you be doing to prepare?

  1. Do you have a payment strategy? Are Instant Payments a part of that strategy?
  2. The Fed has announced pricing, have you considered what you will charge?
  3. The Federal Reserve has established a value limit for their service. Have you determined the maximum value your financial institution will allow to be sent in one transaction?
  4. Are you or your customers still writing checks? Could the bill paying process be improved with FedNow?
  5. Can you identify use cases or customers who would take advantage of a new and faster payment system?
  6. How would Instant Payments affect your cash flow?
  7. Has your core provider reached out to you?
  8. Still feel like you lack some key information? Check out the FedNow Service Readiness Guide. It is very comprehensive and while it reviews much of what you already know, you will find a section dedicated to Technology Planning; Treasury Operations Planning; Liquidity Management; Information Security and even a Sample of the Activity Report the Fed will provide.
  9. OR Call The Bankers Bank!
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