FedNow FAQs: A guide for banking & payments operations teams

Posted: 23/10/2023 | Read time: 3 minutes


The Federal Reserve has launched its FedNow service. So participating banks and payments services providers (PSPs) can now offer instant payments to businesses and individuals.

This will have huge consequences for the global payments industry. For individual firms, offering the service will also have a big impact on their back-office processes.

To help you understand how FedNow will impact your operations, we’ve answered some frequently asked questions about the new service. Click on the links below to jump to an answer.


What is FedNow?

The FedNow Service is an instant payments infrastructure developed by the Federal Reserve.


When did FedNow launch?

The Federal Reserve has been planning and testing FedNow for years. It finally launched the first phase of the service on 20 July.


How does FedNow work?

It allows consumers and businesses of every size to send and receive real-time payments – 24/7, 365 days a year.


What are the benefits of FedNow?

Federal Reserve Chair Jerome H. Powell said it “built the FedNow Service to help make everyday payments over the coming years faster and more convenient.”

Firms that adopt the system earlier could also gain a competitive advantage and increase customer satisfaction. And payments clearing and settling in real time reduces risk for financial institutions.


How many firms have signed up for FedNow?

According to the Federal Reserve, 35 banks and credit unions – and the US Department of the Treasury’s Bureau of the Fiscal Service – had instant payments capabilities via the service ready on the launch date.

It said another 16 service providers were ready to support payment processing for banks and credit unions on the launch date.

However, more banks and PSPs have announced they’re offering the service since the go-live date.


How will FedNow affect back-office teams?

While the benefits of FedNow outweigh the challenges, implementing the service will impact back-office teams.

Adopting FedNow means moving away from legacy batch settlement processes. You’ll need to change existing ways of working, technology, and client behaviour to adopt it successfully.

The Federal Reserve said treasury operations is a key function you’ll need to review.


How can operation teams accommodate FedNow ?

You’ll have to assess existing infrastructure and technology and ask whether it is flexible enough to accommodate the new service. It also needs to accommodate further requirements the Federal Reserve could implement.

The Federal Reserve has told organisations they “need to evaluate the impact around-the-clock settlement will have on your liquidity needs and understand the liquidity and reconciliation tools that will be available through the FedNow Service.”

To help banks and payment service providers prepare for offering FedNow, the Federal Reserve selected several organisations – including AutoRek – to feature in its FedNow Service Provider Showcase. You can check them out here.


AutoRek for FedNow

AutoRek helps financial institutions implement instant payments. Features that support the FedNow service include:

  • Data management
  • Automated reconciliations
  • Real-time MI
  • Accurate and transparent reporting
  • Automated workflows

The solution takes data in any format and automates every part of the reconciliation process. So all you have to do is investigate breaks and manage exceptions. It’s helped our clients cut the time spent on reconciliations by 90%+.

It’s easy to use, so your operations team don’t have to rely on internal IT departments for reconciliations. You get full control of your data with comprehensive MI and reporting. And an iron-clad audit trail allows you to see all actions you’ve taken within the system.

Wherever you are in your FedNow journey, we can make it easier – so get in touch with the team today!

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