For payment processors, the
One of the reasons is the size of the U.S. payments market, and the country's relatively few options for instant settlement. Quick uptake of
"While the U.S. has been traditionally behind on payments technology,
Canada's real-time payment project has been
"Canada has been trying to do real-time pay for a while but is having a hard time figuring it out," Passalaqua said. "There's so much complexity with so many banks and regulations in the U.S. Making it work in the U.S. in a major way could create a model that could be used elsewhere."
North America lags in real-time payments. About 511 billion in yearly real-time transactions are forecast globally by 2027, up from 290 billion in 2022, according to
India had 89.5 billion real-time transactions in 2022 and an annual growth rate of 76%. Brazil was in second place with 30 billion transactions and a 230% annual growth rate in 2022. China, Thailand and South Korea had 17.6 billion, 16.4 billion and 8 billion real-time transactions, respectively.
By comparison, real-time transactions in North America are expected to expand from 3.9 billion in 2022 to 13 billion by 2027, according to ACI, which says the introduction of FedNow could make North America a "high growth" region with numbers that exceed ACI's own forecast.
That, of course, depends on how fast banks and credit unions adopt FedNow, and how that adoption drives other faster settlement options. There were 57 FedNow participants at launch, and it could take more than a year for most banks to get on board.
"Banks will have to get up to speed, some of our software partners will have to adapt their code," Passalaqua said. "FedNow will compete with other models, but it's a healthy competition."
Time to process
Much of FedNow's adoption will come through firms that provide payments technology to banks.
Jack Henry has more than 90 clients in the queue for FedNow, and supports more than 200 clients on The Clearing House's RTP network. Jack Henry's payments hub enables banks and credit unions to access both rails.
"There's a huge opportunity to grow deposits with the receive capability," said Tede Forman, president of payment solutions at Jack Henry. "As use cases continue to develop, we anticipate significant traction and adoption of real-time payments capabilities."
Fiserv said it has more than 100 clients committed to be part of FedNow, with most of these institutions scheduled to go live in the coming months. Fiserv clients that were live at launch include Mediapolis Savings Bank and Salem Five Bank.
"There is demand brewing," said Mike Kresse, senior vice president of money movement and retail solutions at FIS.
A key indicator of real-time payment demand in most countries will be the system's use in billing, Kresse said.
One of the initial add-ons to real-time payments is "request for pay." This enables utilities or other recurring billers to match invoice presentment to instant settlement to help payers manage liquidity.
The Single European Payments Area and Australia's NPP real-time payment system have both recently added real-time billing. "The value for 'request for pay' in managing liquidity will become apparent, and that will push a tipping point in the U.S.," Kresse said.
If FedNow's impact pushes widespread use of instant settlement for recurring bills, for example, that could make the practice standard in parts of the world where real-time billing is available, Worldline's Passalaqua contends.
Dutch payment processor Adyen is also supporting instant settlement in the U.S. as part of the company's U.S. expansion strategy. Adyen is embracing updated
"Every market is unique, but overall the FedNow announcement here in the States will continue to help generate interest in real-time rails," said Rehman Baig, vice president of payment partnerships at Adyen. "There's an inevitable shift which will happen over the next decade — why continue to support a delayed, fragmented payments structure?"
Adyen is in the process of integrating with FedNow, which will enable the company to support the receiving and sending of real-time payments. Since Adyen received a U.S. banking license in 2021, the company has updated its bank technology to enable institutions to connect with real-time rails from any international location. "Our capabilities will be enabled hand-in-hand as other banks enable real time payments via FedNow as well," Baig said.
The next frontier
Swift, which enables a messaging system for international payments, is not a processor — but it is building a foundation for instant settlement around the world.
Swift recently commenced a
These tests demonstrated that Swift can process real-time, instant payments between different currency areas, said Marianne Demarchi, chief executive for Europe at Swift. Swift's project is in line with the
"Interoperability is a core feature of Swift's strategy, and will be a key enabler for instant payment schemes around the world," Demarchi said.
The processors are mostly working in markets that have real-time payment schemes up and running, as a way of positioning themselves to compete in cross-border real-time payments, according to Gareth Lodge, a senior analyst for global payments at Celent.
If FedNow connects to India's United Payment Interface, for example, that would certainly increase adoption levels of FedNow. And networks outside of the U.S. will be seeking to connect to the biggest networks and those with the largest banks using it, Lodge said.
"For these established markets, cross-border is the next frontier, with many pilots being investigated around the world, and many U.S. banks and networks are participating in these pilots," Lodge said.
The most prominent cross-border real-time payment project from the U.S. point of view is
"Here the use cases differ. Some are for cross-border retail, but many are for either remittances or to replace Swift," Lodge said. "Swift is designed for very large transaction values, and so some argue that it is over-engineered for smaller transaction values. This is why Swift has been pushing its real-time capabilities."
