The NAFCU Journal March-April 2020 - 22

''

I think faster payments will be the new normal,
regardless of the channel that they flow through.
Consumers want fast, secure, frictionless payments and
will look for their financial institution to provide the options
to make this happen in a simple and intuitive manner.
- SARA DOLAN, CFO, MICHIGAN STATE UNIVERSITY FEDERAL CREDIT UNION

FedNow Service on Its Way

Right now, some of the payment providers don't reach all institutions in the
United States, or they charge high fees
that make it difficult for smaller credit
unions to use their services. In a few
years, a new effort by the Federal Reserve
Board could help remove that barrier.
Announced last summer, the developing
infrastructure called FedNow Service is
a system that by 2023 or 2024 will allow
for fund transfers within seconds - any
time of day, 365 days per year - for
institutions served by the Federal Reserve.
Initially, the system will facilitate transfers
only within the U.S.
Although the FedNow Service is projected
to be operational in a few years, it will

take many more years to build it out fully,
observers note. The Federal Reserve is
reviewing public comments on its 2019
Federal Register notice and will publish
another Federal Register notice with a
FedNow Service description this year.
Documents and fact sheets are available
on Federal Reserve websites that offer an
overview of the plan and features under
consideration. (One site is www.
frbservices.org/financial-services/
fednow/index.html.)
"I believe FedNow will compete in this
space and help bring down the cost to
participate," Dolan says, adding that
credit unions will need to plan for the
impact of faster payments. "Faster payments will benefit members by allowing
more flexibility in payment options."

''

The FedNow Service fact sheet makes
similar points, indicating that the
Federal Reserve Board will build an
infrastructure for the service that will
extend nationwide and be available to
the 10,000 depository agencies it works
with, and not just those that have joined
private networks. A lot of people on
tight budgets, especially those in underserved areas, could avoid expensive
check-cashing services and other fees
if they had access to real-time money
transfers through the FedNow Service.
"FedNow should benefit credit unions
by leveling the playing field," says Bill
Thomas, first vice president of member
operations at United Nations Federal
Credit Union (UNFCU), based in Long
Island City, N.Y. "The goal is to enable
all U.S. financial institutions to offer
faster payment services."
Andrew Morris, senior counsel for
research and policy at NAFCU, notes
that the initial functionality of the
FedNow Service will depend on the
Federal Reserve's views regarding what
features are considered critical, as well
as the service's cost recovery model,
which remains undecided. He estimates
that widespread consumer adoption of
real-time payments will take years, but
adoption of faster payment options as a
whole could occur over a shorter time
frame. He notes that the service will
be designed to facilitate real-time
interbank transactions.
As far as baseline expectations, credit
unions might offer online portals through
which consumers can make real-time
transfers to pay their bills, with the potential for streamlined person-to-person
payments, Morris says.

22

THE NAFCU JOURNAL  MARCH-APRIL 2020


http://www.frbservices.org/financial-services/fednow/index.html http://www.frbservices.org/financial-services/fednow/index.html http://www.frbservices.org/financial-services/fednow/index.html

The NAFCU Journal March-April 2020

Table of Contents for the Digital Edition of The NAFCU Journal March-April 2020

The NAFCU Journal March-April 2020 - Cover1
The NAFCU Journal March-April 2020 - Cover2
The NAFCU Journal March-April 2020 - 1
The NAFCU Journal March-April 2020 - 2
The NAFCU Journal March-April 2020 - 3
The NAFCU Journal March-April 2020 - 4
The NAFCU Journal March-April 2020 - 5
The NAFCU Journal March-April 2020 - 6
The NAFCU Journal March-April 2020 - 7
The NAFCU Journal March-April 2020 - 8
The NAFCU Journal March-April 2020 - 9
The NAFCU Journal March-April 2020 - 10
The NAFCU Journal March-April 2020 - 11
The NAFCU Journal March-April 2020 - 12
The NAFCU Journal March-April 2020 - 13
The NAFCU Journal March-April 2020 - 14
The NAFCU Journal March-April 2020 - 15
The NAFCU Journal March-April 2020 - 16
The NAFCU Journal March-April 2020 - 17
The NAFCU Journal March-April 2020 - 18
The NAFCU Journal March-April 2020 - 19
The NAFCU Journal March-April 2020 - 20
The NAFCU Journal March-April 2020 - 21
The NAFCU Journal March-April 2020 - 22
The NAFCU Journal March-April 2020 - 23
The NAFCU Journal March-April 2020 - 24
The NAFCU Journal March-April 2020 - 25
The NAFCU Journal March-April 2020 - 26
The NAFCU Journal March-April 2020 - 27
The NAFCU Journal March-April 2020 - 28
The NAFCU Journal March-April 2020 - 29
The NAFCU Journal March-April 2020 - 30
The NAFCU Journal March-April 2020 - 31
The NAFCU Journal March-April 2020 - 32
The NAFCU Journal March-April 2020 - 33
The NAFCU Journal March-April 2020 - 34
The NAFCU Journal March-April 2020 - 35
The NAFCU Journal March-April 2020 - 36
The NAFCU Journal March-April 2020 - 37
The NAFCU Journal March-April 2020 - 38
The NAFCU Journal March-April 2020 - 39
The NAFCU Journal March-April 2020 - 40
The NAFCU Journal March-April 2020 - Cover3
The NAFCU Journal March-April 2020 - Cover4
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