A year after its launch, the FedNow® Service, the instant payment service introduced by the U.S. central bank last July 20, has seen 900 banks sign up and connect to the new rails. Seth Perlman, global head of product for i2c, told PYMNTS that the sign-ups bode well for faster payments — but getting to 7,000 banks and critical mass will take time and education.
“It’ll take a long time to get institutions that adoption curve,” and for the banks connecting to FedNow to number in the thousands.
Nonetheless, he said, “this is incredible traction, for a brand new payment network to get to that level of adoption in the span of a year.”
There’s some knowledge and insight to glean from the emergence of faster payments across the globe, particularly in Europe, and what consumers and businesses demand.
And what they’re demanding, Perlman said, “is that payments be instant, just like every other aspect of our lives.” The sentiment echoes statements made by Mark Gould, chief payments executive for Federal Reserve Financial Services, who said, “the strong growth we’re seeing shows how financial institutions are stepping forward to meet this change in customer expectation.”
Gould’s insight, said Perlman, is “spot on,” where “everyone knows that payments are just one the latest things that are going to become real time. Seeing the smaller institutions jump on board,” he added, “is an accurate reflection of that statement.”
Though education is still needed to illuminate new use cases and benefits of instant payments — as Perlman said, “I’m not sure that everyone is fully up to speed on what FedNow brings to the market.” Perlman noted that the gap is narrowing.
The larger banks are already participating with FedNow, and as Perlman noted, the central bank has been focusing on recruiting community banks and credit unions (a significant client roster for i2c). Reaching the “long tail” of FIs among smaller entities will require processors and providers to be certified with FedNow, and i2c stands in the middle of the equation, connecting the banks to those integrators and supporters of instant payment services.
In terms of easing that connectivity and integration with the new rails, Perlman said, i2c has begun the implementation process to become a certified service provider and anticipates completing the development and testing activities with the Fed through the next several weeks and months. “The goal is to be live by the end of the year, said Perlman.
Beyond the benefits of speed, Perlman said there’s value to glean from the data accompanying the payments, standardized through ISO 20022.
“When you talk about attaching robust payment invoice and other potentially trade finance data to a transaction, that’s what really unlocks real-time payments as a valuable network for business to business transactions and, more complicated types of payments,” he said.
Looking ahead, in the drive to move from the current 900 FIs tied to FedNow to 7,000 banks, Perlman said there will need to be a “combined effort” between the Fed and partners in the ecosystem,” such as i2c to help educate those FIs.
“We’re really excited to have the opportunity to bring real-time, interbank payment to our clients and allow them to speed up payments reconciliation and adding additional data to their transactions,” he told PYMNTS.
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