Progress on Fast Payments for All: An Update on FedNow
Remarks by
Lael Brainard
Vice Chair
Board of Governors of the Federal Reserve System
at
FedNow Early Adopter Workshop
Rosemont
(via webcast)
August 29, 2022
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I am pleased to join the FedNow Early Adopter Workshop.1 With the technical
testing phase of the FedNowSM Service kicking off in mid-September, I want to
particularly thank the early adopters for the important investments they are making to
prepare for the day when the FedNow Service goes live next year. Together with our
partners, we will be ready to launch the FedNow Service between May and July of 2023,
bringing this innovative core instant payment infrastructure to financial institutions of
every size across America. We have been working hard to deliver on time, but ultimately
the number of American businesses and households that are able to access instant
payments will depend on financial services providers making the necessary investments
to upgrade our payments infrastructure. Together, we can ensure that all Americans have
access to a modern and reliable instant payment system.
The payment system is a critical part of America's infrastructure that touches
everyone. Americans rely on the payment system all day every day to make purchases,
pay bills, and get paid-without ever needing to consider the complex infrastructure that
is operating under the hood. American households and businesses want and deserve
payment transactions that work seamlessly, reliably, and efficiently.
Fostering a safe, efficient, and widely accessible payments infrastructure has been
a central part of the Fed's mission since the very beginning. The Federal Reserve Banks
all around the country have provided payment and settlement services alongside the
private sector for more than 100 years. Over that period, we have repeatedly innovated
and invested in collaboration with the private sector to transform the payment system,
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using the latest technology to better meet the needs of businesses and households.2 Now,
after extensive industry engagement and planning, the Federal Reserve is on track to
deliver the FedNow Service by May to July of 2023.
The FedNow Service will transform the way everyday payments are made
throughout the economy, bringing substantial gains to households and businesses through
the ability to send instant payments at any time on any day, and the funds being
immediately available to recipients to make other payments or manage cash flow
efficiently. Immediate availability of funds could be especially important for households
managing their finances paycheck to paycheck or small businesses with cash flow
constraints. Having the capacity to manage money in real time could help households
avoid costly late payment fees or free up working capital for small businesses to finance
growth. Indeed, during the pandemic, we witnessed how essential rapid access to funds
can be, as many households started spending emergency relief payments on the day they
were received.3
To deliver on the promise of a payment system for the future, the Federal Reserve
has made a substantial commitment to the FedNow platform, which has benefited from
the innovative technologies and approaches proven by global technology companies that
are vital for today's always on digital economy. Our cloud-first design, unique among
central bank instant payment services, positions us for the future by enabling not only the
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throughput and scalability required for high-volume retail transactions but also broad
geographic points of resiliency to ensure continuous service. Cloud-first design affords
other key technology components such as self-healing processes and automation, which
add to operational resiliency. And our development processes are agile, allowing us to
deliver new features faster to financial institutions of all sizes as they are ready to adopt
them based on their priorities.
We have also invested heavily in stakeholder engagement to ensure readiness for
service adoption through efforts like the pilot program, the FedNow Explorer resource,
the FedNow Community, the service provider showcase, and the FedNow Early Adopter
Workshop.4 To advance the goal of nationwide reach for instant payments, we have
worked closely with the private-sector RTP instant payment service on message
specifications to ensure alignment in support of routing interoperability.
Just as the Federal Reserve has made a substantial commitment to our new instant
payment infrastructure, we are calling on industry stakeholders to do the same. The shift
to real-time payment infrastructure requires a focused effort, but the shift is inevitable.
The time is now for all key stakeholders-financial institutions, core service providers,
software companies, and application developers-to devote the resources necessary to
support instant payments. This means upgrading back-office processes, evaluating
accounting procedures to accommodate a seven-business-day week, arranging liquidity
providers, deploying a new customer-facing application, and promoting instant payments
for key use cases to customers. As the service providers featured at this event will
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demonstrate in the coming days, parts of the industry have already seized on the
opportunity to build new services and capabilities that support instant payments. These
efforts will increase competition in the market for end-user services and promote
innovation-key benefits from providing the FedNow Service as a neutral platform,
accessible to financial institutions of all sizes nationwide.
I would like to personally thank our early adopters. The input that you have
provided has been instrumental for our team as they have designed and built the service,
and the time and energy that you have committed to this effort is important for a
successful launch. I want to call on additional banks and core service providers to join
your commitment to prepare for adoption of the FedNow Service. This time next year, I
hope we can all have a great sense of accomplishment in our shared effort to transform
America's payment system for the digital era.