Demand for real-time payments continues to grow globally, and the launch of the Federal Reserve’s real-time payments rail, FedNow, one year ago, offers another avenue to send and receive funds instantly.  

Real-time transactions are predicted to reach 575.1 billion by 2028, with a compound annual growth rate of 16.7%, according to tech provider ACI Worldwide’s Prime Time for Real-Time 2024 report released in April. In the United States, real-time transactions are expected to grow 27.1% over the same period, much of which is attributed to the launch of FedNow.

While adoption of FedNow continues to grow, reaching 864 institutions as of June 2024, the Fed has not shared the payments volume of the network. 

To boost the network’s transaction volume, the Fed can pull levers to drive the adoption rate, Heman Daswani, principal presale consultant at tech provider Temenos, told Bank Automation News. 

The Fed needs to change its sales pitch to highlight the benefits of FedNow to financial institutions, Daswani said.  

“It’s one thing to say that I have built a fantastic highway. You can use it for whatever you want,” he said. “And it’s a different thing to convince financial institutions and probably even build out some specific use cases that will entice them to start using or offering the service to their customers.” 

Use cases like bill payments, early wage access and business-to-business payments can help drive the adoption of FedNow, Daswani said.  

The federal government can also drive payment volume through channels like Social Security and tax refunds, he said. 

Demand for RTP

Whether it’s adoption of The Clearing House’s Real-Time Payments network or FedNow, there is a need for instant payments, Trevor Nies, senior vice president and global head of digital at card service company Adyen, told BAN.  

Financial institutions are seeing demand for instant payments from businesses and consumers, and it’s not so much about the rail, but the capability, Shruti Patel, chief product officer for business banking at U.S. Bank, told BAN. 

“A multiplayer ecosystem is a good one. … More and more businesses are figuring out a competitive edge to real-time payments, getting paid instantly [and] receiving payments instantly,” she said.  

U.S. Bank is among the 864 institutions onboarded with FedNow, along with Citizens Bank, JPMorgan Chase and Wells Fargo. 

It’s not necessarily RTP against FedNow, but rather how these rails can boost overall access to instant payments, Nies said, noting that for adoption of both rails to increase, they must work toward interoperability, which is in the cards in the future. 

“It has been a successful one year” for FedNow, Daswani said. “If they’ve been able to gather or convince 800 institutions to sign up for the service, I think that’s a big feat.” 

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