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7 Frequently Asked Questions about FedNow Instant Payments

November 07, 2023
By Mark Keeling, Catalyst Corporate Senior Manager, Payments Strategy & Product Innovation

7 FAQS about FedNow Instant PaymentsThe FedNow® Service has helped revolutionize the payments industry as a driving force in the nationwide adoption of instant payments. Since the launch of the Federal Reserve's new payments rail in July, many frequently asked questions and misconceptions have emerged. Here's a look at some of them, along with need-to-know information to help keep your credit union on the fast track – and the right track – toward faster payments.

1. Is the FedNow Service a new form of ACH?

FedNow is a new payment rail, not part of ACH, cards or wires. It is a new network specifically designed for instant payment of transactions and financial settlement.

2. Is the FedNow Service just another P2P solution like the one I already have?

The FedNow Service is a payment rail connecting financial institutions for instant payments that have special features such as request for payment and ISO 20022 messaging. The service does not have a front-end interface. Think of it as a phone line that needs a phone to make it work, and Catalyst has the phone.

3. Should I wait to explore the FedNow Service until more of my members are asking for it?

 Members may not be asking for the FedNow Service by name, but demand has been rising steadily for all instant payments, including P2P apps.

4. Am I required to open/manage a direct account with the Federal Reserve?

While that is an option, there is no requirement to do so. Financial institutions may use a correspondent relationship, such as Catalyst, to settle transactions.

5. Can I work with one provider that supports both FedNow transactions and settlement?

 Unlike non-financial institution service providers, some organizations, like Catalyst, provide solutions to support both send and receive transactions and settlement.

6. Are there other connectivity options besides working with my core provider?

Catalyst has an open access API that provides connectivity to both the FedNow Service and The Clearing House RTP Network.

7. Is "Receive only" a good first step for launching the FedNow Service?

Depending on your business model, you may wish to begin by only receiving transactions. As more institutions and merchants implement sending transactions, "Receive only" allows members to receive payments at your credit union.

When it comes to driving innovation and exceeding expectations in today's new era of instant payments, credit unions deserve an all-in-one partner with like-minded goals –and now, they have one. With helpful resources, smart solutions and expert guidance, we make connecting to the FedNow Service simple and straightforward.

To learn more about the benefits of connecting to the FedNow Service through Catalyst, visit the Digital Payments Experience or contact our experts today.