The U.S. Federal Reserve’s FedNow platform has exceeded expectations in its first year, expanding its reach to 10% of financial institutions, so far.  

FedNow is expanding its reach to financial institutions on the network and volume is expected to follow in the coming years, Kristin Robertson, director of account management at fintech Finastra, told Bank Automation News. FedNow has surpassed The Clearing House’s (TCH) Real Time Payments network adoption, she said.

For now, growth is expected to continue as “the U.S. Department of Treasury has announced that they are intending on using FedNow,” Robertson said.  

“Treasury has 70 different back-office payment systems, so when they say they’re committed to using FedNow, they’re looking to replace traditional checks with FedNow.”

— Kristin Robertson, director of account management at fintech Finastra

Tax returns and FEMA payments are two uses cases where the Treasury can tap FedNow which can be a big resource for many people looking for access to government funds quickly, Robertson said.

The FedNow network may see “hockey stick growth” as more FIs join the network and the U.S. Treasury, one of the biggest payments originators in the country, starts using the channel, Robertson said. 

FEMA in 2023 processed $13.3 billion in payments to individuals and communities affected by natural disaster, according to a Dec. 29, 2023 FEMA release. 

The U.S. Treasury was an early adopter of ACH payments 50 years ago and is looking for ways to make payments faster and less expensive than checks, David Lebryk, fiscal assistant secretary for the Treasury, said in an Oct. 10, 2023, Federal Reserve blog post. The Treasury is currently focused on developing use cases of “one-time, manually processed disbursements where speed to access funds is particularly important,” he said. 

As of Aug. 6, FedNow had 902 financial institutions on its network, like JPMorgan, BNY Mellon and Bank of America, according to the Fed’s website.

TCH has 691 FIs on its network since its launch in 2017, with an average daily volume on RTP of $977,376, a company spokesperson told BAN. The Fed Reserve didn’t respond to BAN’s request about specific payment volume. 

FedNow was launched in July 2023 with 35 FIs on its network and has recorded a growth of 2,400% in number of participants in just over a year, according to the Fed’s data. 

While many FIs and government agencies have adopted FedNow, payment volume on the network will grow as more use cases develop, Robertson said. 

Rising adoption 

Similar to the U.S. government, the private sector is showing increased FedNow adoption, Alberto Casas, head of product management for U.S. Bank, previously told BAN. 

“We have been working with our customers along very specific use cases that create the most value and where our customers are ready to use real-time payments,” Casas said. Bill payments and early wage access are some prominent uses cases that businesses are exploring on the payments rail, he said. 

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