Association Files Comment Letter in Support of the “FedNow Service”

The Association has filed a comment letter with the Federal Reserve Board on its proposal to develop and operate a new interbank 24/7/365 real-time gross settlement (“RTGS”) service. The service is to be known as the “FedNow Service,” and will include an integrated clearing functionality to support faster payments in the United States.

The Association’s comment letter addressed credit union support for a system which will provide people with access to the money they have earned in real-time. A faster payments system will yield benefits to both credit unions and their members, such as fewer overdrafts, payday loans, late fees, and interest charges. Its impact will result in financial institutions, including credit unions, recognizing funds in real time. This will provide economic benefits of speed and convenience, as well as the ability for individuals and businesses to more flexibly manage their money and make time-sensitive payments whenever needed, or, for a business, receive payments immediately assisting in cash flow management.

Making the payments process more efficient benefits everyone involved, and the Association is supportive of a system that will ensure that fast payments are available to everyone, regardless of size. As smaller institutions, credit unions often express discomfort with relying on an entity owned by competitors for a critical component of payments infrastructure. The Association believes that the Federal Reserve is uniquely placed to deliver a balanced and fair outcome.

The proposed system will bring instant payments closer to a reality, promoting consistency and efficiency in payments processes. However, as the Federal Reserve moves forward with finalizing such a system, the Association raised a number of issues and suggestions for consideration prior to finalization. Points addressed the importance of reaching universality of an RTGS system; the need for interoperability; collaboration amongst all institutions and stakeholders and the need to account for smaller institutions; the role of the existing Clear House and its own real-time payments network known as RTP; and the implementation timeframe.

Comments also addressed support for the establishment of a pilot program prior to full launch of the FedNow system. Institutions of all sizes and types should be engaged for trial runs to ensure that payment is complete and that all processes work as intended. Any such pilot program must not delay, however, the full development of a properly functioning FedNow service. As such, the Association encouraged the Federal Reserve to appropriately balance the importance of full functionality of the system with its timely delivery, and work as expeditiously as reasonable in the development of the service.

The Association’s full comment letter can be read HERE. Please send any questions or comments to govaff-reg@ccua.org.

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