“We have not launched a new payment rail since RTP and the Fed has not launched a new payment solution in decades.So this is a big change.”
Eric Faust, VP of North American Banking Partnerships at Trustly, told PYMNTS that there is a roadmap ahead that will see a logical progression of advocates and use cases once the launch of FedNow in July becomes official. said.
Asked by PYMNTS what the initial rollout will be in the first weeks and months after the initial introduction of instant money transfers, Faust said, “Small regional banks, regional banks, credit unions will concentrate on a large scale,” he said. He said the banks have previous experience with the clearinghouse’s RTP network and will use some of that experience to extend FedNow’s capabilities.
Short-term roadmap
There are currently two types of payment transactions enabled by the Federal Reserve’s FedNow: credit transfers and payment requests.
“I would bet on the firm that within the first 12 months of FedNow going live, most of the trading volume will be through credit transfer solutions,” he said. B2B transactions will lay a solid foundation, especially in credit transfers. The result will be an increase in account-to-account transfers across FedNow, similar to what we saw with RTP.
However, FedNow does not have debit functionality, so consumers must make a payment request to transfer money to their wallet account. According to Faust, “Consumers will go to wallet providers. , must be vetted and approved, or funds from the bank must be pushed into the wallet.”
Still ACH and wire location
FedNow is expected to revolutionize how we manage our finances, but be aware that for certain use cases and transactions, slower payment methods such as ACH and wire transfers may still be available. is important. Faust argued that instant payments will cannibalize some of the current activity, but that the introduction of FedNow will not completely replace any payment solution.
“I don’t think the FedNow rollout will completely replace either payment solution, but I think it will cannibalize some of the current activity,” he said. He noted that instant payment rails are generally a cheaper option when payments are less than $500,000 and are domestically transferred between FedNow-enabled banks. If the Fed raises the transaction limit from $500,000 to over $1 million, FedNow will be used more for these high-value (usually commercial) transactions.
digital wallet
Faust said FedNow could also mark a tipping point in funding digital wallets. Historically, he explained, there have been two sides to managing these wallets. One side has payments, the consumer has money in a wallet and may want to “pay” from that wallet and push the funds into the main wallet. Primary checking account. That feature goes beyond the credit transfer rails.
Another aspect of wallet management is the “deposit part” where consumers move money into their wallet accounts. FedNow “has no concept of withdrawals,” he said, requiring users to submit a request for payment (RFP). Therefore, the consumer must issue a request to the wallet provider to approve the funds from the bank or push them to the wallet in order to complete the transaction. Given the friction inherent in the process—consumers needing to verify their identity and transactions being irrevocable—there may not be much traction here, he said.
Reliable, he said he is a member of the Fed’s RFP “working committee” to address concerns about user experience and make it easier to choose RFPs over other payment options.
“If these things can be addressed, RFPs will be a valid use case to really gain traction and volume and funding for digital wallets…that reality is a few years away,” he said. rice field.
Looking ahead, Faust predicted that in the future there would be a wide range of well-funded and interoperable options combined with intelligent routing. He believes interoperability between financial institutions registered in different payment networks is a desirable direction for the industry. Additionally, as the networks mature and evolve, both FedNow and RTP payment limits will continue to increase, he said.
