FedNow Service: Capabilites at Launch
Transcript of FedNow Service: Capabilites at Launch
FedNow Service: Capabilities at Launch
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Agenda
Get ready for the
FedNow Service, an
opportunity to learn
more about the launch of
instant payments
Introduction
Service Overview
Features & Capabilities
Account-to-Account Use Case
Q & A
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End users can access the service through
their financial institutions as they do today
with other payment systems
Overview The FedNow Service is being developed by the Federal Reserve to enable financial
institutions (FIs) of every size, in every community across America, to provide safe and
efficient instant payment services in near real time, around the clock, 365 days a year
FIs eligible to hold accounts at the Federal Reserve
Banks can participate in the FedNow Service and
connect directly or through a service provider
FIs can designate a service provider or
agent to connect directly and send or
receive payments on their behalf
End users can access the service through
their financial institutions as they do today
with other payment systems
Other industry providers can work with FIs to
create and offer a variety of instant payment
solutions
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FedNow Payment Flow
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Roadmap Overview The FedNow Service is use case agnostic, which means that with innovation from the industry a
range of use cases can be supported to solve your customer’s instant payment needs.
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Release 1 Core Clearing & Settlement
The initial release prioritizes core clearing & settlement features that enable use cases, enhance safety/security and improve customer experience
Core clearing & settlement (C&S) features
24x7x365 Real Time
Credit Push
High Availability
Access via FedLine® Channel
ISO 20022 Messaging
Maximum Transaction
$ Limits
Remittance Information
Master Account
Settlement
Correspondent/ Respondent
Intraday Credit
7 day Accounting
Basic Reporting
Service Level
Transfers
Settlement
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Value-Add Features The FedNow Service will offer features that enable use cases, enhance safety/security
and improve customer experience
Release 1 Potential future features under consideration
All FedNow core clearing & settlement features
Core C&S
Directory
(to support P2P)
Final
confirmation of
posting
Request for
Payment (RfP) Bulk
messaging
Use case
enabler
Safety /
security
Extended
remittance
Message
signing
Basic Fraud
controls (Lists,
limits, reporting)
Enhanced
Fraud controls
FI Avail. Mgmt.
(Status messages)
FI to FI Liquidity Transfers (LMT)
FedNow Portal 24/7/365 DI
Balance
Availability
Resolution
mgmt.
Enhanced reporting
APIs (Informational,
Transactional)
Customer
experience
Use case enabler
Safety / security
Customer experience
Potential features to be enabled via multiple releases per year
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Participation Types FedNow participation types are optional and configurable, to provide maximum flexibility and drive early adoption
Credit Transfer
Receive Only Send & Receive Request for Pay (RfP)
• Able to receive or return
customer payments and send
request for payments (RfP)
• Not able to initiate customer
payments or receive request
for customer payments (RfP)
• By default, enabled to send
and/or receive FI liquidity
transfers (LMT); can be
disabled
• If an FI plans to transition to
instant payments over time,
beginning as a RO participant
may be a good option
• Able to send, receive, and return
customer payment messages
• Able to send and can enable receipt
of RfP; receiving RfP can be disabled
• By default, enabled to send and/or
receive FI liquidity transfers (LMT);
can be disabled
Settlement Services
Settlement Only for FIs
• A correspondent can settle a respondent’s FedNow transactions
• Correspondents can receive real-time
notices of debits or credits and inquiries for
FedNow Service reports by setting up a
participant profile with connection
information for their respondents
• Settlement Only does not support initiating
credit transfers
• Able to receive requests for payment; must also
enable Credit Transfer Send & Receive
participation type
FI Transfers
Liquidity Management Transfers (LMT)
• FI-to-FI transfers to support instant payment
liquidity needs at specified times, including when
the Fedwire® Funds Service is unavailable
• Between master accounts of two participants or a
participant’s master account and a joint account that backs another private-sector instant payment
service
• Not required to enable other participation types in
the FedNow service; by default, LMT is enabled
for the Send & Receive participation type
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Participation Types - Overview Participants can enable any combination of participation types within the Service to meet their specific requirements and can modify them as needed
Customer
Credit
Transfers
Send
Customer
Credit
Transfers
Receive
Return
Customer
Credit
Transfers
FI
Liquidity
Transfers
Request
for
Payment
Send
Request
for
Payment
Receive
Send/Receive ** **
Receive Only **
Settlement
Only
Liquidity
Management
Transfers
N/A N/A N/A
** can disable
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Questions?
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Account-to-Account (A2A) Use Case
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Market Research Faster A2A transfers reduce credit and settlement risk for financial institutions and
funding delays for new accounts. In a survey of ~2,000 corporations and consumers,
two top benefits of faster/instant payments were immediate funds availability and
around-the-clock 24/7/365 access to funds
Corporations and businesses identified their top use cases as:
• Internal transfers (32%)
• Cash pooling to consolidate funds across subsidiaries (15%)
• Account sweeps (6%)
• Funding prepaid accounts (6%)
Consumers identified their top use cases as:
• Transfers between accounts at the same FI (29%)
• Transfers between accounts at different FIs (28%)
• Draw/fund prepaid debit accounts (15%)
• Transfer funds between FI & brokerage accounts (14%)
Source: March 2021 FRFS Insights on Industry Payments Readiness Activation Survey
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Primary A2A Use Cases Based on industry feedback, five A2A use cases have been identified:
✓ Me to me - funds transfers between my account(s) at two different
institutions
✓ Me to you - funds transfers from my account to someone else’s account
✓ On us - internal money movement within an organization
✓ Brokerage – immediate funding of brokerage accounts
✓ Mobile Wallets – funding or defunding a digital wallet
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Me-to-Me/Me-to-You Allows your customers to instantly transfer money between accounts, improving
efficiency and supporting real time money management
Use case Example Benefits to end-user
Me-to-Me Moving money from a checking • No settlement risk to bank
account at one financial institution to a • Real-time money management for checking account or savings account consumer at a different financial institution using
• No funding delay at new account an RTN and account number
initiation
Me-to-You Making a payment from one financial • No settlement risk to bank
institution to a different financial • Real-time money management for institution using an RTN and account consumer number
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On-Us The ability to move money across accounts at the same FI solves an expensive
problem for businesses who may be unable to move funds within their general ledger.
It is estimated that issuing 500 checks per month can cost ~$1200 in labor costs
Use case Example Benefits to end-user
On-Us Moving funds between internal
accounts across a corporation and
its subsidiaries.
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Real time money management for your
institution
Facilitate money movement from one
core to another core in the case of
• mergers
Revenue potential from combined
balances
• Internal funds transfers for account
liquidity
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Brokerage Accounts Reduced risk and enhanced customer experience lie at the core of the A2A
brokerage account use case
Use case Example Benefits to end-user
Funding • Fund brokerage account via • Faster funding time
brokerage credit push (could be initiated • Time savings for firms and consumers in Accounts by RfP from brokerage portal) linking brokerage accounts to funding
reducing liquidity risk accounts
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Mobile Wallets As industry stakeholders innovate on top of the FedNow Service and consumers
embrace digital and contactless banking, consumers can fund and defund these
accounts in near real-time
Use case Example Benefits to end-user
Fund / • Fund wallet account via credit push • Time savings for consumers as they link
defund wallet accounts and spur adoption of • Defund wallet account to FI via credit wallet mobile wallet push
• Faster funding time
• Faster money movement to credit
consumer account
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What’s Next In preparing for FedNow, there are some key considerations that your organization
can address today
Product and Capability Planning
✓ Are there specific instant payment use cases that are of interest to your business or retail
customers?
✓ What participation types will meet the needs of your customers and the use cases of
interest?
✓ Will you be ready to send/receive RfPs on behalf of your customers?
Technology Planning
✓ What additional capabilities or enhancements to existing systems may be needed to
handle real-time processing and the desired customer use cases or experiences?
✓ Which service providers need to be engaged to support your targeted use cases?
✓ What interaction points for customer-facing and internal staff might be impacted?
Make Sure You…
o Discuss FedNow implementation with your Account Executive
o Determine how to handle continuous availability within your environment
o Access MyStandards® and review ISO® specifications if you are preparing to support FedNow in-house
o Engage your service providers to understand how they may support you in your FedNow journey
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Questions?
“FedNow,” “Fedwire and “FRBservices.org are service marks of the Federal Reserve Banks.
A list of marks related to financial services products that are offered to financial institutions by
the Federal Reserve Banks is available at FRBservices.org.
“ISO” is a registered service mark of the International Organization for Standardization.
CONFIDENTIAL AND PROPRIETARY
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prohibited.
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Resources
To learn more about the following please visit:
FedNow payment flow
https://www.frbservices.org/financial-services/fednow/blog/asked-answered-fednow-payment-flow.html
FedNow features: Flexible participation types https://www.frbservices.org/financial-services/fednow/blog/fednow-features-flexible-participation-types.html
FedNow ISO20022 Message specifications https://www.frbservices.org/financial-services/fednow/blog/announcing-iso-20022-specifications-initial-launch-fednow.html
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