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International expansion of U.S. real-time payment services seems to be at hand as FedNow, the instant-payment service operated by the Federal Reserve, prepares to test cross-border transactions.
Announced Wednesday, the test will involve a group of organizations that were not named. They will test “FedNow enhanced message formats that facilitates sending and receiving the U.S. domestic leg of cross-border payments,” a Fed statement says. Eventually, all FedNow participants will be able to adopt this technology, the Fed says. Possible use cases could be international payroll, corporate payments, and disbursements for property transfers, insurance claims, and global treasury management.
“Cross-border transaction capabilities will give financial institutions powerful new ways to serve internationally active customers. After several years focused on growing the domestic instant payments market, this is an important first step toward meeting the global needs emerging across our ecosystem,” Nick Stanescu, chief FedNow executive, says in a statement.
Cross-border FedNow transactions will enable banks and credit unions, whether sending or receiving, to support their clients whose transactions involve entities outside the United States, the Fed says. Within the U.S., FedNow will handle the transaction and the international portion will travel through established correspondent banking arrangements. This is similar to the Fedwire model, it says.
The FedNow move parallels a similar one from RTP, the real-time payments network from The Clearing House Payments Co. LLC. RTP approved a rule change earlier this year to allow cross-border payments. Some banks are already working on the technology, a TCH spokesperson tells Digital Transactions News. “We expect to see payments really starting in Q1 2027,” the spokesperson says.
In an example for an inbound cross-border payment, RTP will be the “instant last mile” of the transaction, RTP says. “This provides 24/7/365 capabilities for incoming cross border flows, and banks and credit unions can deliver funds into U.S. DDAs with immediate settlement and confirmation, aligning with modern expectations for instant payments,” the spokesperson adds.
International payments have been eyed by both services as a way to improve their services and expand their networks.
