Hear from FedNow® Service early adopters

Get the inside scoop from FedNow^® Service early adopters

The launch of the Federal Reserve's FedNow Service marked a key milestone in modernizing the U.S. payment system. The new instant payment infrastructure enables eligible depository institutions of a variety of sizes across the U.S. to offer instant payment solutions that consumers and businesses are increasingly demanding. Today, more than 500 institutions are live on the network, and the number is growing daily. 

Innovators from across the payments industry played an important role in informing the design and functionality of the FedNow Service. Since its launch in July 2023, early adopters of the service have been on the vanguard of instant payment innovation, paving the way for others. 

Keep reading for insights from several FedNow early adopters who are leveraging instant payments to meet their customers' needs. 

Instant payment use cases 

The FedNow Service is use-case agnostic, meaning it provides a flexible platform that financial institutions and other organizations can use to build and deliver instant payment solutions for any number of different use cases. 

The possibilities are endless when it comes to instant payment transactions, but there are key use cases that early adopters — encompassing financial institutions and others in the payments industry — say are especially relevant for their customers or members.  

"One of the biggest use cases we see is for loan payments," said Kevin Olsen, senior vice president of innovation and strategy at Pidgin, a secure real-time payments platform and certified service provider of the FedNow Service. "We want to give community credit unions and community banks the ability to collect and process loan payments instantaneously so it's beneficial for both sides. That means no heartache over late fees or penalized credit scores for consumers."

Earned wage access and payroll are also key use cases for instant payments. 

"Payroll is one we see for obvious reasons," said Mark Majeske, senior vice president of faster payments at Alacriti, a financial technology company that's certified to support payment processing for FedNow participants. "If you are a rideshare driver, for example, and can get paid at the end of your shift, it's a great benefit if you need that money to, for example, pay your bills on time."

Organizations see value in different use cases depending on their own business goals and the needs of their customer base.

"In my opinion, our client base will benefit the most from request for payment use cases. Small businesses need the ability to send an invoice with their request and have that request and invoice returned to them with the correct information," said Malinda Rickel, chief operating officer of The Bankers' Bank in Oklahoma City. "I can't think of a use case that could benefit a small business more than automating their payables systems."

Additional use cases showing potential for businesses and individuals include insurance and government transactions like tax payments to government or municipal entities that can in turn deliver time-sensitive payments. Notably, the U.S. Department of the Treasury's Bureau of the Fiscal Service was among the first early adopters live on the FedNow Service.

The use cases above only scratch the surface. As it's done in the past, the industry will collaborate to develop innovative new payment solutions.

"I truly think that the market will find applications that solve issues for our customers and for the industry as instant payments become more commonplace in daily life and business," said David Long of Bryant Bank.   

Planning for FedNow Service adoption 

Implementing any new system takes time and planning, and Federal Reserve relationship and onboarding managers stand ready to help. The FedNow Explorer website also offers resources for every stage of the process.

Understanding the needs of customers and the types of instant payment education they may require are important aspects of preparing for the service. 

"During the process, it was important for us to complete risk assessments, align on strategy, and consider what requests we may receive from our customer base," Long said. "My advice is to ask questions about how your organization will use instant payments and to understand what problems you are solving for that are currently causing pain. This helps determine what your customers need and defines what education is necessary during the initial rollout phase. Education is very important — being in the industry, it can be easy to take that for granted."

Assessing the business impacts and benefits of instant payments across your organization, and involving leaders and various teams early in the process, is also critical. 

"First, I presented the opportunity [to implement instant payments] and potential business impact and benefits to our CEO and COO. This was important because our CEO led the way in broadcasting the plan and communicating with our board of directors," said Suzy Morris, senior vice president and head of treasury management at Illinois-based Peoples National Bank. "The second step was getting tech involved to prepare for upgrades to our access points. From there, it was a matter of bringing in operations and helping that team understand how to process instant transactions and create workflows through the organization. Instant payments touch so many parts of an organization — it's very important to bring each team in early on."

Harnessing the momentum of instant payments

While financial institutions across the country are in different stages of adopting instant payments, the FedNow Service network is growing daily. Many financial institutions agree that they need to offer instant payments to remain competitive and meet the demands of their customers or members.

"When we looked at the transaction habits of our members, we noticed that many of them were already using faster payment platforms in their daily transactions," said Scott Young, vice president of payment operations at HawaiiUSA Federal Credit Union. "So, while they didn't come to us and ask for the FedNow Service by name, we realized that to keep up with our members, we needed to look for innovative ways that money could be moved to and from our credit union."

Many in the industry have already noted an evolution in conversations about instant payments.

"In the beginning, there was a focus on education because banks and credit unions couldn't immediately picture a new instant payments rail as part of their offerings," Majeske said. "But the conversation has shifted from what instant payments are to how financial institutions are going to use them."

As more and more financial institutions adopt the service and find ways to develop and offer new products that meet the needs of consumers and businesses, the FedNow Service plans to adapt to further support innovation over time. 

The Federal Reserve continues to listen and work with the industry and release additional features and functionality. To stay up to date on all things FedNow Service, sign up to receive FedNow News emails. For more resources and information, visit FedNowExplorer.org.

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