On August 5, the Federal Reserve Board announced that it will develop a new 24x7x365 real-time payment and settlement service to support faster payments in the United States. In a speech at the Federal Reserve Bank of Kansas City, Governor Lael Brainard announced the long-awaited decision that the Federal Reserve will develop what it is calling the FedNow Service^SM, which it expects to launch by 2023 or 2024 and will initially support transfers of up to $25,000. The service will operate alongside The Clearing House’s RTP® Network.

To date, there has been both significant support for and opposition to the Federal Reserve’s involvement in the real-time payments space. In both a series of FAQs and the Federal Register notice, the Federal Reserve attempted to address several issues that commentators have raised concerning fair and equitable access, competition, efficiency, innovation, interoperability, pricing, and safety of both payment system stakeholders and the U.S. financial system at large.

Although the Federal Reserve made clear in its FAQs that access to the FedNow Service will be available only to depository institutions eligible to hold accounts at the Federal Reserve Banks, some Fintech industry leaders focused on the concept that the service is intended to be a foundation or infrastructure “on which banks across the country and the broader payment industry can build modern, innovative, and safe faster payment services.” Fintechs, however, could gain direct access to the Federal Reserve’s proposed real-time payment and settlement service if pending litigation surrounding the OCC’s special purpose Fintech charter is resolved in the OCC’s favor.

During her speech, Governor Brainard also signaled again the Federal Reserve’s opposition to companies that seek to establish a payment system that bypasses U.S. banks and currency altogether. Citing Facebook’s Libra project specifically, she noted that it “raises numerous concerns that will take time to assess and address.”

The Federal Reserve is requesting comments on how the new service might be designed “to most effectively support the full set of payment system stakeholders and the functioning of the broader U.S. payment system.” Comments will be due within 90 days of publication in the Federal Register.