During the Aug. 31 FedNow town hall, early adopters shared their excitement about the service, which continues to gain momentum, according to Senior Vice President and FedNow Business Executive Nick Stanescu. "In just one month since launching the FedNow Service," said Stanescu, "we've gone from 35 live financial institutions and 16 service providers to 62 participating financial institutions and 20 service providers ready to support payment activity, and these numbers are growing weekly." The growth rate in one month is significant by any measure and speaks to the growing interest in and demands for instant payments using the FedNow service.
Early Adopters Speak Up
News of growing momentum came as no surprise after hearing from a panel of early adopters who shared how the FedNow Service is helping them as an organization find business value for their customers. Panelists, who represented financial institutions of various sizes and geographic locations, included Bob Steen, Chairman & Chief Executive Office of Bridge Community Bank; Liana Muller, Senior Vice President & Group Product Manager, U.S. Bank; and Brad Ganey, Senior Vice President and Chief Operating Officer, Catalyst Corporate Credit Union.
"My customers tend to be smaller business customers, but they have all the same needs large customers have—they want to find a way to pay and receive payments efficiently," said Steen. "We're trying to make sure we give our customers the opportunities they would expect from any bank. We're a small bank."
Steen explained that although he wanted to implement it immediately, his bank's core provider wasn't ready. But he didn't let that stop him. Like many financial institutions, Steen plugged into a third-party provider—a partner the bank had worked with for over a decade. Steen said he would like his peers to understand there are alternatives to relying on their core.
Steen offered this example of how FedNow is helping offer value to its customers. Using a real estate closing, he provided an example: "Imagine real estate funding being funded in seconds compared to people sitting around a law office or a closing office for hours waiting for confirmation of a wire.”
Ganey pointed out that the nature of FedNow is that there will be more options for financial institutions.
"We're seeing more cooperation, more open APIs than we have ever seen with any other payment rail, and that translates down to the individual financial institutions," he said. "The way things are flowing from our perspective is that we're having a tremendous amount of engagement with credit unions."
As a large financial institution, things have looked different for Muller. Her financial institution was a participant in instant payments early on. She noted that although there are differences between FedNow and RTP®, there are also similarities. Because of the lessons learned from the financial institution's early involvement, they could leverage the same customer interface for both RTP and the FedNow Service. From the customer's perspective, it feels like the systems are interoperable—although they are not. She added that it's been an excellent experience for her financial institution and its customers.
FedNow Demonstration in Real-Time
Following the panel discussion, Minal Gupta, Vice President of Remote Services for Star One Credit Union, demonstrated how seamless the customer experience could be using the FedNow service. Like other town hall participants, Gupta focused on integrating the service on the backend so customers would experience a seamless experience using the customer dashboard.
Currently, the send limit is $5,000, but Gupta said that as their financial institution moves forward with FedNow, it anticipates increasing the limit. For customers, the process is simple. Members plug in a one-time passcode and submit the transaction. All the work occurs on the back end in real time.
Government Payments Use Cases
The final portion of the town hall focused on government use cases, highlighting the growing excitement that the U.S. Treasury and Bureau of Fiscal Services are live on FedNow and considering how they can leverage instant payments for federal government payments.
Carl Slabacki, Co-Head of Global Payments with BNY Mellon, opened the discussion, calling listeners' attention to the COVID-19 pandemic and the number of government disbursements sent to consumers.
“I think what our expectations are going forward with FedNow is that the greatest benefit of some of the early use cases is that it can touch the customers directly, whether they’re engaging with an entity online or there’s an actual need for that person to get funds instantly on a continuous basis,” said Slabacki. “Going back again to the pandemic, think about the Bureau of Fiscal Services, just as an example, and the economic impact payments that went out . . . This [FedNow Service] gives them a tool to do this.”
Rob Houser, Global Head, Strategy & Product Management of Conduent, added that multiple use cases fit the government space and public sector space. The first one, said Houser, is around emergency payments in the government space during disasters.
"In any natural disaster or crisis that hits a state, people could be without a mailbox. There's a perfect example of that going on now in Hawaii,” said Houser. “The traditional way of receiving funds during a crisis is via check, which attracts a lot of fraudsters. You need money in your account to pay for basic services like housing or food for your family, and that’s where FedNow comes in.”
Slabacki pointed out that there are many questions about interoperability between FedNow and RTP®. While the services are not interoperable, it is possible to offer both services and make the process relatively seamless for customers. Simplicity is the goal for the consumer.
As the session ended, the focus turned to the future, with the Fed reminding listeners that new features will continue to roll out over time. However, they urged listeners not to wait. Instead, they suggested FIs contact their Federal Reserve relationship manager to explore and collaborate on potential use cases and opportunities for their organization and its customers and information on how to onboard the FedNow Service as soon as possible.
The closing message of the town hall was that adoption of the FedNow Service is growing, and financial institutions should not wait to get involved.
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.