Sunday , February 28, 2021

A Planned Pilot for FedNow Spurs More Than 110 Banks And Processors to Sign up

The Federal Reserve reported late Monday it has received more than 110 expressions of interest from financial institutions and processors for a real-time payments pilot program slated to start later this quarter. That number exceeds the 80 entities the Fed expected to participate in the pilot for the FedNow service, which the central bank has been working on since announcing the program in August 2019.

Among the institutions on the pilot list are major banks like Capital One Financial Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wells Fargo Co. But scores of small community institutions are also listed, along with large and small processors with roots in the banking industry, including Fiserv Inc., FIS Inc., and Jack Henry & Associates. Among fintechs listed are Green Dot Bank and ACI Worldwide Inc.

“Many of these participants want to have a voice in the development of FedNow to hopefully ensure/prioritize operability with solutions they already have in place,” says Erika Baumann, senior wholesale banking analyst at Aite Group, a Boston-based consultancy, in an email message. “Others are hopeful to learn about the requirements to … be able to prepare for implementation and/or check for feasibility and costs vs. [return on investment].”

“We’re gratified by the industry’s tremendous interest and willingness to devote time and energy to help us develop the FedNow Service,” said Esther George, president and chief executive of the Federal Reserve Bank of Kansas City and executive sponsor of the Federal Reserve’s payments- improvement initiatives, in a statement. “As a result, we’ve adjusted to accommodate more participants than we originally planned.”

The Fed said it also received correspondence regarding the pilot from more than 80 entities that offer payments technology and services to financial institutions and end users. As a result, the Fed said Monday it will start later this year what it calls an “ecosystem participant program” to allow these vendors to comment on specific use cases and contribute to technology testing. “Additional details will be announced soon,” the Fed announcement said.

FedNow represents the second effort to create a national real-time payment network for the U.S. market. The other network, the Real Time Payments System, is operated by The Clearing House Payments Co. LLC, a New York City-based technology firm owned by 24 major financial institutions, seven of which have signed up to participate in the FedNow pilot. The RTP network began operating in 2017 and so far has signed some 95 financial institutions.

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