As the Federal Reserve moves ahead with its plan to develop the FedNow real-time payments settlement service, the American Bankers Association noted in a comment letter today that “FedNow can contribute to a better, faster and safer payment system if implemented correctly.” However, ABA emphasized that the FedNow service—which is not expected to be operational until 2023 or 2024—must be interoperable with existing faster payments systems (including the Clearing House’s RTP network) on day one. The association raised concerns about signals from the Fed that have suggested that FedNow would not be interoperable at the time of implementation, but would strive to become so at a later date.
“A faster payments ecosystem that does not provide interoperability between systems with similar levels of service and security will fragment the market. It will also result in excessive costs and inefficiencies for banks, increase costs, and produce inferior customer experiences,” ABA cautioned. “If FedNow is not interoperable with existing faster payment services, depository institutions . . .will need to decide which service [they]will offer to their customers, while recognizing that they will be unable to send or receive payments to users of the other service.
ABA also emphasized the need for the Fed to prioritize bank-only access and provide new liquidity management tools as it develops FedNow. The association also called on the agency to work constructively with core providers to ensure smooth implementation for community banks and create a flat pricing model that offers the same per-item fees regardless of institution size, among other things.