Real Time Payments

What’s the issue?

The Federal Reserve has indicated that it will develop a real-time payments network to facilitate interbank funds settlement by 2023 or 2024.  In a real-time payments environment, system funds will leave a payer’s account and be deposited into a receiver’s account immediately. Since 2017, The Clearing House has operated its own Real Time Payments Network, which reaches about 50% of deposit accounts. The development of a system by the Federal Reserve would provide an additional opportunity for financial institutions to take advantage of a real-time payments network for the benefit of their customers.

How does it affect consumers?

Consumers benefit from faster payments because it allows them to send and receive payments in real time, removing the lag that consumers and businesses experience today. The more banks that adopt a faster payments system, the more consumers and businesses that are served.

As the Federal Reserve develops its system, ABA encourages policymakers to prioritize the following features:

  • Interoperability – The system the Federal Reserve builds should work with the current Real Time Payments Network, so financial institutions can facilitate real-time payments among each other without regard to which network the institution is using.  
  • Network Access – Direct access should be limited to depository institutions that are already held to strict legal requirements regarding data privacy, deposit insurance and capital requirements; the system should not be open to other non-depository providers that have less rigorous consumer protections.
  • Liquidity – Supporting real-time payments in a 24/7/365 environment requires liquidity support to make sure the money is available to move when the customer requests it day, night or weekend.  The Federal Reserve has proposed several workable liquidity management solutions and they should be implemented right away.
  • Timing – Customer expectations about speed and convenience are changing rapidly.  2023 and 2024 are a long way off. The Federal Reserve should try to implement something as quickly as possible.  
  • Facilitate Connectivity through the Core Providers – The Federal Reserve should provide all system requirements and technical specifications far in advance of implementation deadlines to allow the core service providers, which provide the backend systems for many community banks, to bring their customers online by the due date.
  • Pricing – There should be a flat pricing model offering same per item fees regardless of institution size.

Happening Now 

The Federal Reserve accepted public comments on the development of its so-called FedNow real-time payments system. The comment period closed on November 7.