A “target launch date” of 2023 or 2024 for the Federal Reserve’s new round-the-clock payments service was announced Thursday by the central bank, with a more specific time frame to be announced later “after additional work is completed.”
The agency released its timetable in conjunction with a “service announcement” for the service outlining, for the first time, its core features and functions.
In a release, the Fed said its long-promised “FedNow” service will be introduced over time. It said that approach was chosen based on “ongoing stakeholder engagement, additional features and service enhancements.” However, the Fed also indicated that the core features and functionality of the service, based on extensive input from stakeholders, have been approved by the Federal Reserve Board.
“The FedNow Service, alongside similar services provided by the private sector, will modernize the U.S. payment system and bring the benefits of instant payments broadly to communities across the country,” the Fed said in a release.
One factor pushing the Fed to act: the rapid expenditure of COVID-19 emergency relief payments from the federal government. According to the agency’s point person on developing the FedNow payments service, Fed Gov. Lael Brainard, the distribution of the federal checks “highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints.”
The service details of FedNow were also released Thursday in a notice prepared for the Federal Register. Among other things, the service announcement notes that the first release of FedNow will provide “baseline functionality” to support market needs and assist banks in transitioning to the round-the-clock service.
“The first release will also offer additional optional features where there is high demand, such as fraud prevention tools, the ability to join initially as a receive-only participant, request for payment capability, and tools to support participants in their handling of payment inquiries, reconcilements, and certain exceptions,” the announcement states. “Other aspects of the service, such as fee structures and governing terms, will be announced prior to the launch of the service through established Reserve Bank communication channels.”