The Fed Wants FIs to Prepare for FedNow, But Many Are In No Rush

Source: American Banker

Financial institutions have less than a year to prepare for the launch of the Federal Reserve's long-anticipated instant payment system. It remains unclear just how many will bother. 

In a Monday afternoon speech on the FedNow rollout, Fed Vice Chair Lael Brainard said the availability of instant payments to consumers will depend on how many banks invest in becoming interoperable with the service ahead of its launch next summer.

Banks will have to weigh the cost of these changes not only against the benefits offered by FedNow, but also against the alternative: The Clearing House's RTP Network. 

Active since 2017, RTP has the backing of the biggest banks in the country — 18 of which are members of The Clearing House — as well as more than 250 other institutions. In total, it estimates its total reach to be more than 60% of U.S. demand deposit accounts. Russ Waterhouse, executive vice president of product development and strategy at The Clearing House, said RTP has had a significant head start over FedNow, an advantage that won't easily be overcome.

"FedNow is going to have a pretty tough go because they've got to convince institutions to join when the products, the functionality and the volume of the reach is already on RTP," Waterhouse said. "What is their value proposition? Finding that unique value prop is probably the hardest thing they're going to struggle with."