The proposal would amend Regulation J to allow FedNow participants to use intermediaries other than Federal Reserve Banks when sending funds transfers through the service. In practical terms, that would permit a U.S. bank to use a correspondent bank or another intermediary for the international portion of a transaction while using FedNow to settle the domestic U.S. leg in real time.
The timing comes as PYMNTS Intelligence and Mastercard research finds that 43% of U.S. small and medium-sized businesses (SMBs) that source internationally identify faster payment settlement as their top cross-border payments priority. The same research found that 27% are open to switching providers and that speed remains the most frequently cited area for improvement in cross-border payments.
The proposal therefore addresses a practical market demand.
What the Fed Is Proposing
FedNow launched in July 2023 as a 24/7 year-round instant payment service, but Regulation J currently prohibits participants from using non-Federal Reserve intermediaries. As a result, transactions effectively remain domestic because additional correspondent banks cannot be inserted into the payment chain.
The Federal Reserve proposes changing that framework by permitting intermediary banks, similar to the long-standing model used by Fedwire. The Board stated that the change could “support private-sector cross-border payment solutions” by allowing institutions to use an intermediary for the international segment of a transaction while using FedNow for settlement within the United States.
The proposal does not alter FedNow’s immediate funds-availability requirements for U.S. beneficiaries. A U.S. beneficiary bank that accepts a payment order through FedNow would still be required to make funds available immediately, which would in turn create a real-time settlement rail for cross-border providers alongside Fedwire.
FinTechs Push for Broader Access
Comment letters from financial services providers reveal enthusiasm for the changes and also take note of challenges.
Among FinTech respondents, Stripe offered one of the strongest endorsements.
The company stated that the proposal “closes a consequential gap in U.S. payment infrastructure” and urged the Federal Reserve to finalize it “without delay.” Stripe also contended that businesses moving dollars across borders currently lack access to “always-on, real-time USD settlement” because Fedwire and same-day ACH are not continuously available while FedNow remains largely domestic.
Stripe, however, argued that a separate obstacle remains. The company called on the Federal Reserve to revisit FedNow’s on-behalf-of residency restrictions, which currently require the ultimate end customer in certain payment flows to be a U.S. resident or U.S.-domiciled entity. According to Stripe, maintaining that restriction would leave the proposal’s cross-border objectives only partially fulfilled.
Cross-border payments FinTech Wise likewise supported the proposal, describing it as “a meaningful step to making cross-border transactions more efficient.” The company argued that FedNow’s domestic-only design has created an “artificial disparity” with Fedwire and has limited access to the fastest settlement rail for international transactions.
For FinTech firms that already connect directly to payment systems around the world, the proposal represents an opportunity to extend real-time payment experiences into dollar-denominated cross-border commerce.
Banks Support the Goal but Raise Compliance Concerns
Banks generally supported the proposal as well, though their comment letters detailed operational and regulatory challenges.
The Clearing House and the Bank Policy Institute wrote that they support the Federal Reserve’s objective of expanding “always-on payment rails for cross-border payments” and enhancing resiliency. At the same time, the organizations warned that FedNow participants would likely need to implement real-time sanctions screening for cross-border transactions.
Their concern stems from a fundamental characteristic of instant payments: settlement occurs immediately and transactions are generally irrevocable once processed.
The associations recommended that the Federal Reserve and Federal Reserve Financial Services create a specific message code identifying cross-border transactions and adopt a two-phase implementation strategy. Under their proposal, institutions would initially opt into cross-border FedNow activity before broader adoption occurs across the network.
“During an initial pilot period, depository institutions should have the ability to opt-in to receiving and sending cross-border transactions over FedNow. Later, depending on industry readiness and the results of the pilot period, all FedNow participants could be required to accept cross-border transactions,” they wrote.
The groups also questioned whether current FedNow response windows provide sufficient time for sanctions reviews. Receiving institutions currently have only seconds to respond to incoming payment messages, creating potential friction between instant settlement and compliance obligations.
BNY also called for “clear guardrails and well-delineated responsibilities” governing intermediaries and risk allocation. The financial insitution also added of the FedNow proposal that “more broadly, this change would help payments systems evolve in a manner that reflects how institutions and end users increasingly expect to access immediate, bank-mediated payment services. This can expand practical access to instant payment functionality through established banking relationships” and bolster the embrace of instant payments.”
The comment letters reveal a broader issue that extends beyond Regulation J.
Differences in sanctions regimes, know-your-customer (KYC) obligations, data-sharing rules and local payment-system access remain practical constraints. The proposal addresses connectivity inside the United States, but international reciprocity will depend on decisions made by foreign regulators, central banks and payment-system operators.
The Federal Reserve’s proposal does not resolve every obstacle standing between instant payments and global commerce. It does, however, address a structural limitation that has prevented FedNow from participating more directly in cross-border payment flows.
