Fed's Brainard Says FedNow Launching in 2023 and FIs Need to Get Ready

Source: American Banker

Federal Reserve Vice Chair Lael Brainard told a group of early adopters of the central bank's real-time payments system, known as FedNow, that the system should be operational between May and July of 2023.

Speaking via webcast Monday, Brainard said that the pilot phase of the system will start in September and that how rapidly ordinary customers realize the benefits will depend in large part on how quickly banks update their payments technologies to adapt to the new system.

The Fed deliberated for years about whether to create its own payments system, with some bankers and ex-Fed officials urging the central bank to create a competitive environment in payments, while others argued that the broader adoption of The Clearing House's Real Time Payments, or RTP, network would solve the problem more rapidly and at lower cost.  

The Fed announced in 2019 that it would develop its own real-time payment settlement system in 2019, estimating that the project would be in place by 2024. The network would compete with the RTP, which went live in 2017. The Fed appointed Federal Reserve Bank of Boston executive Ken Montgomery to lead the development of the network; he told American Banker in 2019 that the Fed officials were taking their time in order to ensure that they "get it right."

Brainard seemed to think that the Fed had met that standard, touting a "cloud-first" design unique among central bank settlement networks that would ensure both capacity to handle large volumes of transactions and reliability for consumers.