FedNow is a real-time gross settlement (RTGS) service introduced by the Federal Reserve in the United States. It is designed to enable instant, 24/7 electronic payments and fund transfers between financial institutions. FedNow aims to enhance the efficiency and accessibility of the U.S. payments system, offering faster and more secure transactions. The system helps reduce settlement risk and supports the broader adoption of real-time payments in the country.
How FedNow Works
FedNow is designed to operate 24 hours a day, 7 days a week, 365 days a year. It enables participating financial institutions to instantly transfer funds between accounts held at different banks via the Federal Reserve’s infrastructure. Unlike traditional payment rails such as ACH (Automated Clearing House) or wire transfers, which may have delays due to settlement cycles or batch processing, FedNow processes payments in real time, with near-immediate finality.
The system supports payments such as:
Person-to-person (P2P) transfers
Business-to-business (B2B) payments
Government disbursements (e.g. stimulus payments)
Bill payments and payroll
For consumers and businesses, this means faster access to funds, better liquidity management, and greater flexibility—especially in time-sensitive or emergency scenarios.
Impact on the U.S. Payment Landscape
With FedNow, the U.S. joins other countries that already offer national real-time payment infrastructures, such as the UK’s Faster Payments or India’s Unified Payments Interface (UPI). It represents a significant modernization of U.S. payment capabilities and fills a critical gap in the Federal Reserve’s existing services.
By giving institutions a direct connection to a central bank-operated real-time payment system, FedNow enhances competition, innovation, and resilience in the financial system. It also reduces reliance on private-sector alternatives and intermediaries, such as proprietary apps or closed-loop payment platforms.
Implications for Compliance and Fraud Prevention
The launch of FedNow brings both opportunities and challenges from a compliance and financial crime prevention perspective. The speed and finality of real-time payments increase the risk exposure of financial institutions, as fraudulent or erroneous transfers may not be reversible once processed.
Compliance teams must adapt by:
Strengthening real-time fraud detection tools to monitor transactions before they’re cleared
Enhancing identity verification and onboarding controls to prevent account misuse
Implementing behavioral analytics and risk scoring to flag anomalies quickly
Ensuring AML and sanctions screening processes can keep pace with instant payments
Establishing clear protocols for dispute resolution and liability management
Financial institutions will also need to reassess their reporting and recordkeeping frameworks to ensure regulatory obligations are met in a faster transaction environment.
FedNow and Financial Inclusion
One of the goals of FedNow is to improve financial inclusion by reducing barriers to access and modernizing payments for smaller banks, credit unions, and underserved communities. By lowering costs and offering equal access to real-time infrastructure, FedNow can help reduce reliance on costly services like check-cashing or payday lending.
For government programs, it offers a faster, more efficient way to deliver benefits, disaster relief, or emergency aid—especially in times of economic crisis or natural disasters.
FedNow vs. Other Real-Time Payment Systems
FedNow enters a U.S. market already served by the RTP® network (developed by The Clearing House). While both offer real-time capabilities, FedNow is publicly operated and expected to support broader participation, particularly among smaller or regional institutions that may lack access to private real-time systems.
The presence of multiple real-time networks may encourage interoperability over time, improving the overall efficiency and resilience of the U.S. payment ecosystem.
Cybersecurity and Operational Considerations
Real-time payments increase the urgency of maintaining robust cybersecurity defenses. Financial institutions participating in FedNow must ensure their infrastructure can handle:
High availability and resilience against downtime or attack
Encryption and secure messaging protocols for transaction data
Endpoint authentication for customer access
Incident response capabilities for fraud or system breaches
The Federal Reserve has issued guidance and technical specifications to help institutions prepare and certify for FedNow participation.
Strategic Outlook
FedNow marks a transformative shift in the way money moves in the U.S. As adoption grows, it is expected to drive digital transformation across the financial sector, push innovation in payments and compliance technology, and reshape customer expectations around speed and convenience.
However, it also demands a realignment of fraud prevention and regulatory compliance practices, requiring institutions to invest in technology, training, and partnerships to manage new risks effectively.
