FedNow® Service FAQs

A Resource to Get You Started on One of Many Faster Payments

Learn more about the FedNow Service through our most frequently asked questions and how it works.

The FedNow Service is an instant payment service created by the Federal Reserve (FRB). Account holders of financial institutions (FIs) will be able to send and receive instant payments 24-7, 365 days of the year. The funds will settle in the master account of the FI, or their correspondent if that’s how the FI elected to settle the items.

We recommend reading through the FRB’s Readiness Guide. In it, the FRB has outlined key components of how the platform works and steps every participating institution type needs to take to participate in the service.

Of course, read the Readiness Guide referenced above, which goes into great detail on steps to prepare. At a minimum, we can tell you that FIs need to work through two primary components to participate:

  1. The first component to consider is the interface that your FI account holders will use to process payments. This interface will need to have the ability to process payments on behalf of the account holders, including posting the debits and credits necessary to have the accounts reflect the transaction, as well as communicate with the FedNow Service, all in real time. Due to the real time requirement, most FIs will leverage the infrastructure already in place with either their core or a third-party payment provider who has this integration, such as their mobile or online banking provider.
  2. The second component to consider is how to settle transactions. Larger FIs will typically have the transactions settle through their master account at the FRB. Most CFIs will partner with a correspondent, such as PCBB, to have those items settle through the master account of the correspondent.

Yes, in the FedNow Service system, PCBB is a settlement agent and a source of liquidity.

PCBB was also a pilot participant and certified “ready” for the service prior to the systems official launch. As a pilot bank, PCBB represented the interests of CFIs and assisted in in the development of the instant payments strategy, roadmap, and adoption approaches for the industry.

  1. Payments will settle in PCBB’s master account at the FRB, and then PCBB posts the individual items to the customer accounts.
  2. The partnership between PCBB and the CFI eliminates the need for the CFI to monitor their account balance at the FRB 24x7x365. Since each transaction will post to the CFI’s account at PCBB, it will be easy to reconcile the payments with our reporting system.
  3. In the instance that a CFI does not have sufficient funds at their PCBB account, a credit facility will be provided by PCBB to cover the transactions, insuring that all transactions are able to be settled on behalf of the CFI.

No. As a provider of liquidity and settlement services, our products are core agnostic and do not require core integration. In the future, if there are use cases that require core integration, we will reevaluate that possibility.

  1. Account-to-Account
  2. Business-to-Consumer (B2C)
  3. Consumer-to-FI
  4. Person-to-Person (P2P)
  5. Business-to-Business (B2B)
  6. Consumer-to-Business (C2B)
  7. FI-to-Consumer

  1. We always recommend first reading through the FRB’s Readiness Guide.
  2. Speak with your PCBB representative to answer any questions you may have. PCBB can walk you through the specifics of the transaction flow between your institution, FedNow and PCBB.
  3. You’ll want to establish an anticipated timeline to begin using the payments service, and discuss that timeline with your PCBB representative.
  4. Depending on the services you already use at PCBB, you may need to complete additional paperwork to get started. This can be done in advance of your anticipated go-live date.

Similarities:
  1. Both RTP and FedNow have the same goal of providing the ability to quickly transfer funds 24x7x365. From the account holder’s perspective, the two platforms are similar.
  2. Both use the widely accepted ISO® 20022 standard for global messaging.
Differences:
  1. However, operationally the two systems differ, and have different settlement workflows.
  2. As an FRB service and leveraging the FedLine network, it’s expected to be available to 100% of banks and credit unions, whereas RTP can only reach closer to 60%.

The most important thing is to educate the decision makers at your CFI on the similarities and differences between the two platforms. You should also engage your core or online/mobile banking provider, as well as your correspondent service provider, to understand their integrations with each. You can also choose to support both platforms, but you should evaluate if that is the correct decision for your institution.

Your PCBB Regional Manager is standing by ready to assist. We welcome a conversation at any point that is convenient for you, to help you better understand the FedNow Service platform and how our liquidity and settlement solutions work.

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