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FedNow Designed to Complement Private RTP Rails

FedNow Designed to Complement Private RTP Rails

(23 November 2023 - United States) The Federal Reserve has revealed the central bank is not planning to absorb the bulk of the instant payments space but instead complement the private sector Clearing House Real Time Payment (RTP) network.

Federal Reserve Vice Chair for Supervision Michael Barr commented that uptake of the system would take several years and be driven by the evolution of use cases and customer demand. He added that he anticipates banks will adopt both FedNow and RTP.

The Clearing House Real Time Payment network (RTP) started processing in 2017 while Federal Reserve’s FedNow service went live in July 2023. RTP uses a shared pre-funded joint account to settle transactions while FedNow is linked to a bank’s master account at the Federal Reserve.

As of 2022, 59 percent of Americans still pay for at least some of their weekly purchases with cash while cheques are still used for 60 percent of retail payments according to the Federal Reserve Bank of San Francisco.

"The Federal Reserve is a conservative institution, and I think that's appropriate. People expect us to be able to provide trustworthy reliable services, and we earn that trust by being very, very careful about everything we do. And that's true for FedNow" Barr stated.

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