PUB. 18 2021 ISSUE 3

Issue 3 • 2021 21 and advanced customer experience features can leverage technology innovations. Program phases • Initial launch will provide core clearing and settlement functionality to facilitate the most popular uses, such as instant account-to-account transfers and bill pay. • Subsequent phases will enable instant payment for additional types of uses, as well as extra features related to fraud prevention, error resolution, and case management. • Future phases will include other features as program testing provides more information about what the industry needs and additional technology modifications that may be required. How it will work This instant payment service will initially be open to those depository institutions with accounts at the Federal Reserve’s 12 Reserve Banks and 24 branches in the United States. The Federal Reserve’s broad reach, based on connections and customer service relationships with more than 10,000 diverse financial institutions across the country, will support a nationwide infrastructure for these instant payments. Compared with other payment methods, FedNow will expedite the settlement time tremendously. Currently, other faster payment options, such as same-day automated clearing house (ACH), are processed through the Fed’s platform, and the settlements happen in batches, being settled a few times per day. With the FedNow Service, the recipient would have access to the funds in less than 30 seconds. Business use cases The FedNow Service will give community banks the ability to provide instant payments to their customers, effectively leveling the playing field. This allows them to better compete with fintechs as well, which have been dominating in this space. Furthermore, it lets businesses more effectively manage their cash flows in that they can deposit and withdraw funds immediately, as needed. This instant payment system will save businesses time, too. Allen Sztukowski, SVP of Operations at PCBB, notes, “Business use cases involving real-time payments with FedNow have a tremendous potential, both in terms of volume and efficiency gained for all parties.” The FedNow Service instant payment system is on course and moving full steam ahead. As a pilot participant, we look forward to assisting with the developments needed to satisfy the payment needs of community banks and customers alike. n Jay Kenney is a Senior Vice President and Regional Manager at PCBB. You can reach him at jkenney@pcbb.com.