Smaller Banks Join Growing Roster of FIs Readying for FedNow’s Launch

The list of financial institutions — smaller banks among them — readying for real-time payments grows longer.

Salem Five, a mutual bank with roots tracing back to the 19th century, will be among Fiserv’s financial institution (FI) clients working to implement the FedNow Service when it launches in July, per a Wednesday (April 12) press release.

Those FIs, according to the release, will utilize Fiserv’s NOW Gateway.  Salem Five is among the list of 20 FIs piloting the service in tandem with Fiserv. Salem’s asset base stands at about $5 billion, according to the bank’s site. Other smaller FIs in the pilot program include Peoples Bank, with assets of $7.2 billion, and Mediapolis Savings Bank, focused on Iowa.

The Wednesday announcement underscores the growing appeal of faster payments across the financial services landscape, where offering speed and convenience — and 24/7 payments functionality — is recognized as a competitive advantage.

A glance through the Federal Reserve’s list of pilot program participants reveals a broad swath of credit unions and community banks, from A to Z — or here, we’ll say from Alloya Corporate Federal Credit Union to Westside State Bank, just to name two other examples (there are no Z’s yet on the list).

Milestones Ahead as July Looms

As reported by PYMNTS just this week, in a panel discussion on what FIs and their customers can expect when FedNow debuts, Federal Reserve SVP, Head of Payments Industry Relations Connie Theien said the offering will span end-to-end instant payment clearing and settlement, along with features that will help participants with reporting and liquidity management, risk management and fraud management. Fed has opened the window, stretching into mid-June, for the formal certification of participants. The processors and financial institutions that aim to go live on day one are working through testing requirements and validation exercises.

“It’s a full-featured service that can deliver value on day one,” Theien noted during the discussion, “but we’ve also designed the infrastructure so that we can enhance the services in an agile and iterative way … it’s our vision of a ‘Cadillac’ of infrastructure.”

The Fed’s efforts have stretched across the past several years as it has been developing FedNow. In terms of the service itself, access will be provided through the Federal Reserve’s FedLine network, which serves more than 10,000 FIs directly or through processors.

In a separate discussion, illustrating the appeal for smaller banks seeking to join the FedNow ecosystem, Kevin Alsup, senior vice president technology solutions at Excite Credit Union, told PYMNTS that his firm’s clients “want us to provide them with a secure, convenient, instant way of moving money back and forth … we’ve always believed that the Federal Reserve was the one place that could deliver instant payments, which is why this is very exciting for us and for our members.”