FedNow: What You Need to Know and How to Prepare

FedNow is a new instant payment service that will be launched by the Federal Reserve in July 2023. It will enable customers at participating banks and credit unions to send and receive money within seconds, 24/7 and every day. FedNow is intended to be a flexible, neutral platform that supports a broad variety of instant payments. It will also provide a liquidity management tool to support instant payment services.

FedNow has the potential to transform the way people and businesses pay and get paid, offering convenience, speed and security. However, it also poses some challenges and concerns for American business people who need to adapt to the new payment landscape. Here are some of the common questions and issues that business people may have regarding FedNow and what can be done to mitigate them.

How will FedNow affect my cash flow and accounting?

FedNow will enable faster settlement of payments, which means that you will be able to access your funds sooner and have more visibility into your cash flow. However, it also means that you will have less time to manage your liquidity and reconcile your accounts. You will need to update your accounting systems and processes to handle real-time payments and ensure that you have enough funds in your account at all times. You may also need to review your pricing and billing policies to reflect the faster payment speed.

How will FedNow affect my customer relationships?

FedNow will offer more convenience and choice for your customers, who will be able to pay you instantly and securely through their depository institution accounts. However, it also means that you will have to meet their expectations for faster delivery of goods and services, as well as faster resolution of disputes and refunds. You will need to enhance your customer service and communication channels to handle instant payment inquiries and requests. You may also need to offer incentives or discounts for customers who use FedNow instead of other payment methods.

How will FedNow affect my compliance and security?

FedNow will be designed to maintain uninterrupted 24x7x365 processing with security features to support payment integrity and data security3. However, it also means that you will have to comply with new rules and regulations that apply to instant payments, such as fraud prevention, anti-money laundering, consumer protection and data privacy. You will need to update your compliance policies and procedures to ensure that you follow the best practices and standards for instant payments. You may also need to invest in additional security measures and tools to protect your data and transactions from cyberattacks.

How can I prepare for FedNow?

The best way to prepare for FedNow is to start planning ahead and learning more about the service. The Federal Reserve has provided various resources and information for depository institutions and their service providers who are interested in joining or supporting FedNow34. You can also join the FedNow Community, a program that offers opportunities for engagement, education and feedback on the service4. By staying informed and involved, you can make sure that you are ready to take advantage of FedNow when it launches in July 2023.