FedNow: A Public Real-Time Payments Infrastructure Alternative

• On August 5th, 2019, the U.S. Federal Reserve announced plans to develop FedNow, a new Retail Real-time gross settlement (RTGS) service (expected to be available in 2023, at the earliest) and the around the clock expansion of its Fedwire Funds Service and National Settlement Service.
• The announcement comes after political pressure on the Fed to build a competing alternative to The Clearing House’ s/TCH’s Faster Payment, Real Time Payments (RTP®) network.
• The Fed’s new payment and settlement service named the FedNow Service should allow close to instantaneous transfer of funds, 24/7, 365 days per year.

The Federal Reserve System (Board) also requested public comment on whether or not it should establish its own fast payments network, i.e., FedNow. The Board also asked whether the Fed should:

1. Create a new “Liquidity Management Tool” to allow 24 by 7, 365 days transfers among commercial banks’ Reserve accounts (held at the Fed), or
2. Arrange to have Fedwire and the National Settlement Services operate 24 by 7, 365 days.

Community banks praised FedNow, which gives them direct access to a real-time payments system. In contrast to the proposed public FedNow, to use TCH’s RTP network, community banks have to depend on their core processors (Jack…