The FedNow Service will launch in 2023 "Are you ready?"

The FedNow Service is a new instant payment service that the Federal Reserve Banks are developing to enable financial institutions of every size, and in every community across the U.S., to provide safe and efficient instant payment services in real-time, around the clock, every day of the year. Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments conveniently, and recipients will have full access to funds immediately, giving them greater flexibility to manage their money and make time-sensitive payments. Consistent with the Federal Reserve’s historical role of providing payment services alongside private-sector providers, the FedNow Service will provide choice in the market for clearing and settling instant payments as well as promote resiliency through redundancy. Financial institutions and their service providers will be able to use the service as a springboard to provide innovative instant payment services to customers.

Launch Timing

Implementing the FedNow Service in an efficient and safe manner remains a high priority for the Federal Reserve. The FedNow Service will launch in 2023 and will be deployed in phases so that the initial service can be launched expeditiously with additional features and enhancements released in stages after the initial launch. This phased approach will allow for adjustments and improvements in response to industry needs or changes in technology.

Service Design

The initial FedNow Service launch will include:

• Core clearing and settlement capabilities to support a range of transaction types and use cases
• Use of the widely accepted ISO^® 20022 standard and other industry best practices to support interoperability
• Features that will support flexible adoption, including support for the use of service providers and correspondents and an option to enroll as a “receive-only” participant
• Value-added features include request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements, and certain exceptions
• Features to enhance the experience for financial institutions by broadcasting participant availability to support their transition to 24x7x365 operations, a user interface to support data needs, and the ability to have access to balance information on weekends
• Features to support payment integrity and data security and tools to help financial institutions combat fraud, such as a transaction value limit and reporting features
• A liquidity-management tool that will allow participants and others to transfer funds to each other to support the liquidity needs of instant payments

After the initial service launch, we hope to offer additional features related to fraud prevention, error resolution, and case management. We will continue to explore other features, including potential support for person-to-person payments that use the alias of a receiver. Ongoing engagement with the industry, including a pilot program, will play a role in our implementation plans.

Payment Flow

The figure below illustrates a completed payment over the FedNow Service in its simplest form.

In step 1, a sender (i.e., an individual or business) initiates a payment by sending a payment message to its financial institution through an end-user interface outside the FedNow Service. The sender’s financial institution is responsible for screening the payment according to its internal processes and requirements.

1. In step 2, the sender’s financial institution submits a payment message to the FedNow Service.
2. In step 3, the FedNow Service validates the payment message, for example, by verifying that the message meets message format specifications.
3. In step 4, the FedNow Service sends the contents of the payment message to the receiver’s financial institution to seek confirmation that the receiver’s financial institution intends to accept the payment message. At this point, the receiver’s financial institution will have the opportunity to confirm or deny that it maintains the specified account.
4. In step 5, the receiver’s financial institution sends a positive response to the FedNow Service, confirming that it intends to accept the payment message. Steps 4 and 5 are intended to reduce the number of misdirected payments and resulting exception cases that can occur in high-volume systems.
5. In step 6, the FedNow Service debits and credits the designated master accounts of the sender’s and receiver’s financial institutions (or their correspondent financial institutions), respectively.
6. In step 7, the FedNow Service sends a payment message forward to the receiver’s financial institution with the advice of credit and in parallel sends an acknowledgment to the sender’s financial institution, notifying it that settlement is complete.
7. In step 8, the receiver’s financial institution credits the receiver’s account. As a term of the FedNow Service, the Federal Reserve Banks anticipate requiring the receiver’s financial institution to make funds available to the receiver almost immediately after step 7. This crediting to the receiver’s account as well as the debiting of the sender’s account by their respective financial institutions happens outside the FedNow Service.

Use Cases

The first release of the FedNow Service will provide baseline functionality that will support market needs for a range of use cases, including those that are gaining in usage like account-to-account (A2A) transfers and bill pay. Subsequent releases of the FedNow Service will implement additional features to support even more instant payment use cases. Learn more below.

General use case information and opportunities (PDF)

Account-to-account (A2A) use case (PDF)

Bill pay use case (PDF)

Resources

For more information, please review the FedNow Service product sheet (PDF) and frequently asked questions (Off-site). Keep up with the latest FedNow news and instant payments education on the FedNow Service page. To help inform the development of the FedNow Service, join the FedNow Community by submitting our participant profile form. If you do not want to commit to the FedNow Community but would like to receive the latest FedNow news, please sign up to receive FedNow emails.