Revolutionizing Transactions: The FedNow Service Sets a New Standard for Payment Systems in the United States

by | Oct 19, 2023 | The NBS Group

The FedNow Service is a groundbreaking initiative that is revolutionizing the way people and businesses make and receive payments in the United States. It is a real-time payment system that enables instant and secure transactions between financial institutions, 24/7/365 enhancing the efficiency, convenience, and resilience of the U.S. payment system, and it supports the development of innovative payment solutions that are benefiting consumers and businesses alike.


The FedNow Service, developed by the Federal Reserve in collaboration with stakeholders from across the payment industry, just went live in July of this year, is interoperable with existing and emerging payment systems and is compliant with the ISO 20022 standard for data exchange. FedNow offers features such as fraud prevention tools, liquidity management options, settlement services, and request-for- payment capabilities.

The FedNow Service could be a game-changer for the U.S. economy, as it enables faster access to funds, lowers costs, and greater financial inclusion. The FedNow Service fosters competition and innovation in the payment market as it creates new opportunities for service providers to offer value-added services to their customers. The FedNow Service is a win-win for everyone involved in the payment ecosystem and we at The NBS Group are excited to be part of this historic transformation in the payment industry.

The rates of adoption of the FedNow Service are expected to be high as more and more participants join the network and offer the service to their customers/members. According to a recent survey by the Federal Reserve, 80% of banks and credit unions plan to use the FedNow Service or a similar instant payment service within the next three years. The survey also found that 90% of respondents believe that instant payments will be important or very important for their customers/members in the future.

Banks and credit unions are eager to adopt the FedNow Service, but to prepare for this transition, they will need to invest in technology, training, and partnerships that will enable them to offer this new fast, secure, and convenient payment solutions to their clients. Some of the benefits that FedNow will bring includes but is not limited to:


  • Enhanced customer experience: FedNow allows for customers/members to make and receive payments anytime, anywhere, with immediate confirmation and availability of funds. This will improve customer/member satisfaction, loyalty, retention, and acquisition.
  • Increased operational efficiency: FedNow reduces the need for manual processing, reconciliation, and exception handling of payments. This will lower operational costs, risks, and errors.
  • Expanded market opportunities: FedNow enables banks and credit unions to compete with non-bank payment providers and offer innovative products and services that meet the evolving needs of consumers and businesses.
  • Financial inclusion: FedNow Service supports financial inclusion and innovation by enabling access to instant payments for all types of accounts, including low-cost and prepaid accounts, and by fostering new payment products and services.

To prepare for the FedNow Service, financial institutions should consider the following steps:

  • Assess their current payment capabilities and identify gaps and opportunities for improvement.
  • Engage with their core processors, technology providers and other partners to understand their readiness and plans for the FedNow Service.
  • Educate their staff and customers about the benefits and features of the FedNow Service.
  • Participate in the FedNow Community, a collaborative forum where stakeholders can share feedback, insights and best practices on the FedNow Service.

This all sounds straight forward enough; however, for most financial institutions, this will be daunting. Where to begin? How to go about it? Once we know what we want to do, how are we going to get there? We do not have the resources to take this on right now. It is all, understandably, very overwhelming. The NBS Group is here to help. More specifically, the NBS Group is here to help financial institutions like yours look at all the pieces of the puzzle, determine if real-time payment processing is right for your business, and build your customized approach and plan to implement the service. We will start by exploring:

  • Your unique use cases for real-time payments.
  • Possible benefits for you and your clients.
  • How your customers will utilize real-time payment processing.
  • Your customer-facing and non-customer-facing business processes to identify new use cases that would benefit from real-time payment processing.
  • A strategic product roadmap delivering real-time payment processing capabilities across your institution.
  • All the relevant points of integration and interoperability within your existing payment system(s) & treasury management solutions.

“Your strategy as an organization and risk assessment of FedNow should drive the decision-making process on your level of participation with FedNow. Participation is not mandatory, and the FI can set out on a course to just receive payments or to do both send and receive on behalf of their account holders.

Educate your employees on the benefits, risks, and obligations of participating in the FedNow service so you can ask the right questions of your technology providers. I use the plural of providers because financial institutions need not rely solely on their service providers to connect and be a part of the FedNow platform.”

Sean Carter, CEO, NEACH

The NBS Group has developed the Real-Time Payment Implementation Process to expedite your adoption and minimize risks associated with implementation.

This process is not an ALL-IN process. There are gates that allow financial institutions like yours to take measured and calculated steps toward realizing their strategic business objectives with respect to RTP. Investment can be incremental as we work with you through determining the scope, benefits, priorities, budget, and timing for implementing RTP at your organization.

In summary, the FedNow Service truly is a game-changer for the payment industry and the economy. Banks and credit unions should not miss this opportunity to be part of the future of payments. The sooner you start working toward implementing the FedNow Service, the better prepared you will be to offer this exciting new service to your customers/members.