The release date for the Federal Reserve’s planned FedNow real-time payments service is still three or four years off, but more details about its features will be released in the coming months, according to a Federal Reserve official.
“This year we do plan to make an announcement based on … all the input and our decisions about product design,” Connie Theien, a senior vice president at the Federal Reserve Bank of Chicago and the Federal Reserve System’s director of payments industry relations, said Tuesday. In the next several months, she said, the Fed will announce “exactly what the service design will be at the release, as well as a roadmap that leads to what will come.”
The Fed received more than 800 comments about whether it should become a direct operator of a faster-payments system before announcing its decision last August to do just that, and then it took comments until November about what the service should look like. About 180 commentators weighed in before the comment period closed in November.
Fed officials are still reviewing those comments, Theien said at this week’s Payments Summit conference in Salt Lake City sponsored by the Secure Technology Alliance trade group. The system’s basic features are a 24-7 credit-push service with a $25,000 per-transaction limit, with participation limited to Federal Reserve members or their designated correspondent banks or processors. But there are still major decisions to be made, including pricing, what services and technology the Fed should buy from the private sector as it builds the system, and what it should build itself.
“This has fingers into so many Federal Reserve systems that there really isn’t such a thing as, you know, just buy something off the street and set it up in a room and you’re ready to go,” Theien said. “There’s a ton of integration work to do to have this interface with Federal Reserve accounts.”
The Fed has taken flak for FedNow’s long rollout timeline—2023, perhaps even 2024—when private-sector firms such as The Clearing House Payments Co. already are in the market with real-time systems. But getting financial institutions and the Fed banks properly plugged in and operating is “a very big piece of it, it’s a complex undertaking,” said Theien.
Meanwhile, it’s possible the Fed could revisit FedNow’s initial $25,000 per-transaction limit. The Clearing House’s Real Time Payments service and automated clearing house network governing body Nacha with its same-day ACH services have both announced plans to raise their $25,000 limits to $100,000.
“We’ve had a lot of feedback on this that given the service may not be available for three to four years, it might be very challenging for our service to have a $25,000 limit when other services in the marketplace would be operating with higher limits. It’s something we’re very interested in feedback on,” Theien said.
On a related note, Theien in response to a conference attendee’s question said the Fed isn’t planning transaction volume limits for FedNow, but she noted FedNow participants might choose to build such limits into their offerings.