FedNow Announces a $10 Million Transaction Limit, Set for November

The Federal Reserve said Tuesday it will raise the transaction limit on FedNow transactions tenfold, to $10 million, effective in November. Launched in July 2023, FedNow is a real-time payments system linking more than 1,400 U.S. financial institutions.

The move will have come nine months after the rival Real Time Payments network in February boosted its transaction dollar limit, also to $10 million from $1 million. The RTP system, which predates FedNow by seven years, is part of The Clearing House Payments Co., a New York City-based company owned by many of the country’s biggest banks.

FedNow sees the higher limit as an opening for new applications, such as real-estate transactions, vendor payments, and corporate payroll, the network said in its announcement.

Indeed, the move comes “in response to growing demand,” says a notice from the network. “The increased limit will enable financial institutions and businesses to support higher-value use cases and reflects an increasing need for speed and certainty,” the notice continues. The network, which has not yet set a specific effective date in November for the new limit, says banks are free to set lower ceilings.

“Financial institutions need flexibility to serve customers and support internal processes,” said Mark Gould, chief payments executive for Federal Reserve Financial Services, in a statement. “The FedNow Service is shaping how we move money, and the service will continue to be flexible to meet evolving feedback and increasing demand.”

Observers see both necessity and strategic opportunity behind the Fed’s move as well as the earlier increase by TCH. “The higher limits should help both RTP and FedNow take share from wire transfer and support new use cases,” notes Eric Grover, head of the consultancy Intrepid Ventures.

Other experts argue the Fed is responding to demand from banks, particularly following RTP’s move. “FedNow customers have been pushing for a higher payment level, which means they want to put more of their business into faster, safer, and more efficient payments,” says Steve Mott, proprietor of the payments consultancy BetterBuyDesign and a long-time observer of real-time payments, by email. “$1 [million to] $10 million payments are a sweet spot, and we’re at this place in the market evolution where demand from commercial customers is driving banks and networks to ‘strap-up’ to serve them better.”

Observers like Mott also note a faster tempo building at both TCH and FedNow in moving to raise transaction limits. FedNow’s response in particular, Mott says, is coming more quickly. “It is … interesting that the Fed is comfortable matching the TCH moves up the payment ceiling ladder more quickly each time,” he says. “TCH’s volume provides a window into risks—mainly operating risks [versus] fraud risks.  Member banks are the ones that have to handle high-value payments, and as they get comfortable with the transactions, the confidence and appetite to do more grows.”