Although it is early days, “from my point of view, FedNow is doing exactly what it was planned to do,” said Sheril.
She noted that there are more than 200 institutions that have signed on to FedNow, and several service providers — Form3 included — have been certified to support those customers. She pointed out that The Clearing House’s RTP network has had roughly 300 to 400 financial institutions (FIs) on its platforms in the roughly six years since its launch.
“The fact that there are more than 200 [banks on FedNow] is a good sign,” she said, and the pipeline of banks expressing their intent and desire to use FedNow is healthy too. She added that banks looking at FedNow are still looking at RTP for resiliency. So, both networks are seeing increased adoption.
But as of yet there are no claims or evidence of huge volumes of transactions being sent across the new rails, said Sheril. As we head into 2024, she said, account-to-account transactions are gaining some traction — where individual users move money between their own accounts.
“Brokerages are starting to wake up to this,” she said, which will be one of the key drivers of instant payments.
But as businesses look out at the possibilities, said Sheril, they’ll seek to examine new ways to move money 24/7, to push and receive funds on the weekends, and to close deals and transactions around the clock. Netflix, which has made mention of using the RTP rails, and specifically the RFP features, said Sheril, can, along with other companies, bring real-time payments more firmly into the mainstream.
But even Netflix, she said, acknowledges that faster payments need to be used alongside credit card payments, because not everybody can get the request for payment, simply because not all FIs are on the network let alone signed up for RFP. There’s likely to be more sign-ups in the months ahead as the Fed creates and uses directories, an evolution that is under discussion.
There are still some technical considerations that need to be grappled with, on the part of the FIs, said Sheril.
“You can be interested in using FedNow,” she told PYMNTS, “but technically, it’s not so easy. It’s not as simple as connecting to a new rail and creating some ISO messages. You have to be up and running 24/7.” Banks must mull what back-office processes must be overhauled, and how much their dependence on legacy cores and batch processing are hindrances to modernization and faster payments.
Fortunately, she said, “banks are open to looking at vendors and providers who have built modern solutions” and platforms where faster payments have already been enabled rather than tackling tech overhauls on their own.
Banks may have been hesitant to adapt to and adopt FedNow and RTP, but we’re headed toward a reality where past experience with RTP will inform what happens with FedNow, she said. It will be critical to see how the two payment rails will “join forces to grow the whole market and the industry together.” The Fed and The Clearing House have already, and historically, collaborated, so it’s likely that we’ll see joint efforts coalesce in the future.
“There’s been six years of traffic on RTP,” she noted, “and FedNow can take advantage of that and build better solutions and processes in place to enable the future … RTP and FedNow have to align so that everyone can build around it and then banks can use those solutions.” Ultimately both rails will see the benefits in increased adoption and usage of the networks.