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The world is moving at a fast pace, and businesses and consumers expect payments to move just as fast, if not instantaneously. In fact, nearly two-thirds of businesses would factor access to faster payments into future decisions on whether to switch banks.1
To help meet this growing demand, the Federal Reserve has developed the FedNow Service to foster nationwide reach of instant payments. These payments can help your organization attract and retain customers, generate new revenue streams and remain competitive in an increasingly fast-paced world.
Read more about how the FedNow Service will work, and how ACI Worldwide can support financial institutions offering 24x7x365 instant payments.
A new instant payments infrastructure
At its most fundamental level, the FedNow Service provides interbank settlement that enables funds transfers from a sender’s bank account to a receiver’s bank account immediately and at any time.
The service will use the widely accepted ISO® 20022 standard and other industry best practices to make it easier to integrate with back-end systems. Additionally, the FedNow Service will include a wide array of features that will:
- Support flexible adoption, including support for service providers and correspondents and an option to enroll as a “receive-only” participant
- Provide request-for-payment capability and other value-added tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions
- Provide an interface to support data needs and the ability to have access to balance information 24×7
- Support payments integrity and data security, and tools to help participants combat fraud, such as a transaction value limit and reporting features.
Liquidity-management transfers (LMTs) will also be available FedNow® Service: A foundation for an instant payments world to participants in the FedNow Service to support funds transfers for the round-the-clock liquidity needs of instant payments.
FedNow Service use cases
Financial institutions and service providers can work together to leverage the FedNow Service features and functionality as a springboard for developing new instant payments use cases and services. Use cases include immediate payroll, eInvoicing, funding brokerage accounts and making claims payments as a few examples.
Through account-to-account (A2A) capabilities, for example, the FedNow Service can allow consumers to transfer funds between accounts at two different financial institutions to meet a loan payment deadline or cover incoming charges to avoid an overdraft fee. Businesses can use A2A transactions to maximize liquidity and interest income by providing real-time transfers between accounts across subsidiaries.
With bill pay capabilities, your customers — both consumers and businesses — can move money immediately from their own accounts to biller accounts, potentially limiting service disruptions and late fees.
Supporting your instant payments journey
Financial institutions interested in adopting the FedNow Service, or wanting to learn more about it, should start conversations with vendors such as service providers, correspondents and core vendors.
For some, this might include outsourcing aspects of processing and core systems for the FedNow Service. ACI serves as a third-party payments provider, connecting financial institutions to the FedNow Service and processing transactions on their behalf. You might consider partnering with a payments processor if your core systems require significant upgrades to support real-time processing and ISO 20022.
In addition, ACI also offers integrated, scalable fraud management services, deployment options from on premise to SaaS, and managed services with one scalable integration. to build on the security, efficiency and effectiveness of the FedNow Instant payments Service.
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“FedNow” and “FedACH” are service marks of the Federal Reserve Banks. A list of marks related to financial services products that are offered to financial institutions by the Federal Reserve Banks is available on FRBservices.org. “ISO” is a registered service mark of the International Organization for Standardization.
1. Federal Reserve, Businesses Look to the Future with Faster Payments (August 2021)