“FedNow” – the Federal Reserve’s much-anticipated (and delayed) round the clock payment system – will be ready “sooner rather than later,” a key Fed bank president told a bankers’ group Tuesday, reiterating a 2023 debut.
Speaking at the American Bankers Association (ABA) convention in Tampa, Fla., Kansas City Federal Reserve Bank President Esther George said the system is expected to be ready in 2023. George is executive sponsor of the FedNow program. (Her comments confirmed an announcement by the Fed made in February, also targeting 2023 as the debut for the system. Originally, the Fed had set the system’s debut for as late as 2024.)
The Fed has said that it is taking a phased approach to launching the service. The initial launch, set for two years from now, will include core clearing and settlement functionality and key value-added features, such as a request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions, the Fed said.
George told the gathered bankers that the Fed now has about 120 participants in a FedNow pilot. George urged banks at large to start preparing for the rollout in two years.
The FedNow service, according to the Fed, will support instant payments in the U.S. (using concepts similar to existing provisions) 24 hours a day, seven days a week, 365 days a year. In June, the Fed proposed what it called “new and comprehensive” set of rules – but whose concepts are like existing regulations – to govern the new service.
The Fed said the proposed rules detail legal rights and obligations of Federal Reserve Banks and FedNow participants. Under the proposal, the Fed would amend its Regulation J (which governs funds transfers, particularly by check processing and Fedwire funds, among other things), establishing a new subpart C. That subpart would set up the new rules governing funds transfer using FedNow; the current subpart B (applying to Fedwire Funds Service) of the rule would no longer apply to transfers over FedNow.
Subpart B would be altered to reflect the fact that the reserve banks will be operating a second funds transfer service in addition to the Fedwire Funds Service, the Fed said. Some technical changes to subpart A, governing the check processing service, are also proposed.
Comments were due Aug. 10.