Two years after FedNow’s launch promised to revolutionize American payments, we’re witnessing a disconnect between front-end payment capabilities and back-office operations. While over 1400 financial institutions have signed up to FedNow to offer instant payments to customers, most haven’t upgraded their back-office operations to match. The result? “Instant” payments that create hours or days of operational lag time behind the scenes. This a key reason why many banks still can only receive payments but not send. Their systems just can’t cope.
If we’re to truly reach a point of ubiquity, banks must move away from “fake RTP”. To do that, the disconnect between the front-end and back-office operations must be addressed.
Hamstrung by an Overreliance on Spreadsheets
When the Federal Reserve launched FedNow in July 2023, it created new opportunities for banks to offer instant payment services. The promise was compelling: real-time payments, 24/7/365 availability, and immediate settlement.
But according to AutoRek’s research, 90% of payments firms still rely on spreadsheets for reconciliation. When you’re processing payments in real-time but reconciling them using manual methods, you’ve created a significant operational gap between what customers experience and what happens behind the scenes.
The challenge becomes more pressing when you consider current trends. AutoRek’s research reveals that B2B non-cash transactions are growing 10.8% year-over-year, with instant payments and e-money projected to rise from 16% of the payment mix in 2023 to 22% by 2028.
Why This Matters
This operational gap creates several critical challenges that banks must address to remain competitive.
When reconciliation lags behind payment processing, treasury teams lose visibility into real-time cash positions. In a 24/7 payment environment, this delay can significantly impact effective liquidity management. Treasury departments that once relied on end-of-day batch processing now need continuous visibility to manage cash flows effectively, yet many lack the tools to achieve this.
Secondly, competitive pressures are mounting from all sides. Digital-first providers are building their operations around real-time processing from the ground up, setting new standards for service delivery. Traditional banks using manual reconciliation processes risk falling behind these nimble competitors who can offer truly instant service throughout their entire operation, not just at the customer interface.
And finally, regulators are intensifying their focus on operational resilience, fraud prevention, and consumer protection in real-time payment systems. Banks must ensure their systems can support 24/7 operations while meeting existing regulations like Regulation E, which weren’t designed for instant payments, alongside ISO 20022 messaging standards and BSA/AML requirements that become far more complex in real-time environments.
A Practical Path Forward
These challenges can be addressed through thoughtful modernization:
Build incrementally: Rather than attempting a complete transformation, identify your highest-volume payment types and automate them first. This phased approach minimizes disruption while delivering immediate benefits.
Leverage integration capabilities: Modern reconciliation technology can integrate with existing systems through APIs, meaning you can enhance current infrastructure rather than replacing it entirely.
Implement intelligent exception handling: Automated routing can resolve standard exceptions while escalating only true anomalies for human intervention, maintaining control while improving efficiency.
Moving Away from “Fake RTP”
As we mark FedNow’s second anniversary, financial institutions face a clear choice. The payments landscape is evolving rapidly—transaction volumes are growing, regulatory expectations are increasing, and customer demands for real-time service continue to rise.
Financial institutions that modernize their reconciliation and back-office processes now will be better positioned to truly deliver on the promise of real-time payments. Those that don’t may find themselves struggling to keep pace with both customer expectations and operational demands.
The path forward is clear: to deliver truly instant payments, banks need operations that can move just as fast.
Nick Botha is Global Payments Sales Manager at AutoRek, where he helps financial institutions modernize their payment operations for the digital age