4 FedNow® Service Updates You Need to Know

Have you kept up with the latest news about the FedNow Service this fall? If not, don’t worry. Now is your time to catch up on all the new developments about the Federal Reserve’s instant payments network.

Whether your credit union is already participating in the FedNow Service or you’re still thinking about joining, you don’t want to miss these exciting updates.

Participation is climbing as demand for instant payments intensifies

The number of financial institutions participating in the FedNow Service continues to rise as organizations shift their view of instant payments from a “nice to have” to a “must have” to remain competitive in the ever-evolving payments landscape. Today, more than 1,500 credit unions and banks headquartered in all 50 states are live on the service.

By offering instant payments, participating financial institutions are meeting the growing demand for fast, convenient payment methods. Recent surveys from Federal Reserve Financial Services show that more than two-thirds of businesses would use instant payments if offered to them. Similarly, around 6 in 10 consumers state it’s important for their financial institution to offer instant payments, with 78% of Gen Z in particular calling it important, a 14% increase year over year.

Financial institutions live on the FedNow Service are enabling a variety of use cases. Transactions being made over the service include off-cycle payroll and earned wage access, digital wallet defunding, real estate escrow payments, auto loan disbursements, online marketplace seller payouts and more.

FedNow Service now available for instant federal agency disbursements

The U.S. Department of the Treasury’s Bureau of the Fiscal Service announced it has added the FedNow Service for instant disbursements for federal agencies, including FEMA, as part of its Digital Payout program.

The inclusion of the FedNow Service into Treasury’s Digital Payout program will equip agencies with a modern and efficient way to provide instant payments to individuals and organizations across the country.

As more Digital Payout use cases come online, an increasing number of individuals and organizations qualifying for those payments will likely choose to get their funds instantly, which is a great reason for financial institutions to join the FedNow network.

Network transaction limit will increase to $10 million in November

The FedNow Service network transaction limit will increase from $1 million to $10 million in response to growing commercial demand. This increase will enable financial institutions and businesses to support higher-value use cases such as corporate payroll, vendor payments and real estate transactions.

Financial institutions will continue to be able to set lower transaction limits based on their own risk parameters and business needs. They can also use FedNow risk mitigation tools like account activity thresholds, which provide participants with greater control and confidence as they expand their instant payment offerings.

New risk controls deliver enhanced network intelligence and reporting

The Federal Reserve is currently engaging with pilot participants —both financial institutions and service providers — on a network intelligence tool. This API will allow financial institutions enabled to send payments over the FedNow Service to request information (“data insights”) about a receiver account before submitting a transaction to the FedNow Service.

This capability will allow financial institutions to better identify the risk of a potential payment by doing a pre-check on a receiver account. It also enables financial institutions to leverage network-level data insights to complement their own payment data and fraud mitigation processes to decide whether to proceed with sending a payment.

In addition to the network intelligence pilot, the service added the ScamClassifierSM model to its fraud reporting process, allowing participants to provide additional details on suspicious transactions.

The Federal Reserve is committed to working with the industry to continually develop and enhance the FedNow Service to meet the needs of financial institutions, the people and businesses they serve, and others in the payments ecosystem.

To learn more about these recent developments, read this Q&A with FRFS Chief Payments Executive Mark Gould about volume growth, new product features and other recent developments on the FedNow Service.

For all the latest news and updates about the service, visit FedNowExplorer.org.