On July 20, 2023 the United States Federal Reserve launched a new instant payment service, FedNow. This service allows individuals and businesses to instantaneously send and receive money while allowing banks, payments processors and other financial institutions to build their products on a new centralized and secure platform. 

Banks and credit unions of all sizes can now sign up to use the new interbank payment system to instantly transfer money for their customers, any time of the day, any day of the year. Thirty-five banks and credit unions, 16 payments processors, and the U.S. Department of the Treasury’s Bureau of the Fiscal Service have signed up so far.    

FedNow’s features closely follow those of RTP (Real Time Payments), which are operated by The Clearing House but are available only to larger banks and institutions. The concept of instant payments isn’t particularly new or groundbreaking because real-time funding has been available in the U.S. since 2017 – but access to this speed of funding, and the idea of a secure, centralized system available to all financial institutions, regardless of size, is exciting.   

Does That Mean We Can Now Expect Instant Payments?

Not quite, adoption of FedNow will be gradual. The financial services market in the U.S. is as large as it is complicated, and there are many players to contend with. But the demand from merchants and consumers is here, and so is the support from the Federal Reserve, so we should see increased access to instant payments over the next two to three years.    

Prospects and Challenges

Let’s dive into the prospects and challenges that lie ahead for FedNow. 


First, the good: 

  • Online Stores expect to see increases in sales – thanks to the seamless transaction process. 
  • Small Business Owners can say goodbye to the wait for payments to reflect in their bank accounts – allowing them to instantly understand their finances and run their businesses more efficiently with quicker access to funds, increased liquidity and reduced need for short term credit to cover expenses. 
  • Consumers will be able to track and spend in real time. 


While those benefits draw excitement, there are challenges to building and implementing this innovative technology: 

  • Data Security: In an age where every click leaves a digital footprint, ensuring secure transactions is paramount. 
  • Program Rollout: Time and resources will be required from many different organizations to empower financial institutions to implement the FedNow service.  
  • Fraud monitoring and protection: Monitoring and protection must move fast to keep up with the pace of instant payments on wider scales. 

The Digital Payment Revolution: A Wrap-Up

In a world that’s constantly on the move, the value of time has never been more pronounced. With FedNow, the prospect of instant payments isn’t just a lofty ideal—it’s a tangible reality affecting everyone along the way: 

  • Small Business Owners no longer need to worry about delayed payments. 
  • Online Shoppers can enjoy immediate transaction confirmations. 
  • Financial Institutions are stepping into the future, leaving outdated processes in the past. 

FedNow is at the forefront of the modernization of digital payments. At Clearent by Xplor, we are already seeing an increased demand for real-time payments from our merchant customers. The implementation of FedNow in the next 12-36 months will help financial institutions, business owners and consumers keep people happy who are no longer willing to wait for their funds to clear through financial systems, and businesses are looking for options that provide more control over their day-to-day cashflow.  

Click here to learn more about FedNow from Jill Willard, Chief Technology Officer, Payments at Xplor Technologies.

Article by Clearent by Xplor

First published: August 25 2023

Last updated: July 09 2024