The Federal Reserve outlines FedNow’s pricing structure ahead of 2023 launch

• The Federal Reserve released pricing and fee details for its forthcoming settlement network, FedNow.
• FedNow will be operated by the government, so it’s mandated to break even and cannot turn a profit.
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The news: The Federal Reserve released pricing and fee details for FedNow, the real-time settlement network it will launch in 2023, per a press release.

• FedNow will charge a $25 monthly participation fee for each routing transit number (RTN) that receives credit transfers.
• Senders will pay $0.045 per credit transfer, including returns.
• There will be a $0.01 fee for a request for payment (RfP) message that requestors must pay. This includes both new payment messages and returns.
• The default credit transfer limit will be $100,000, but financial institutions (FIs) will be able to lower it or raise it to $500,000.

FedNow’s advantage: Because FedNow will be operated by the government, it’s mandated to break even and cannot turn a profit. This may let FedNow offer more competitive pricing compared with other faster payment systems, which might help spur adoption.

• Forty-four percent of organizations polled by the US Faster Payments Council cited cost and complexity as a challenge to adopting faster payments.
• Competitive pricing could help FedNow overcome its late entry into the market: Systems like the Same Day Automated Clearing House or The Clearing House’s Real-Time Payment system have had years to integrate with FIs and have been building out their networks.

The bigger picture: Demand for faster payments is apparent across all fronts, which sets up systems like FedNow for success.

• Forty-six percent of treasury and finance professionals said faster or real-time payment processing represented the largest opportunity for innovation within treasury in 2020, per a TD Bank poll. Faster payment activities can create a clearer picture of cash flows for FIs. And consumer-facing faster payment innovations could also open new revenue streams for FIs.
• A “substantial majority” of US businesses said using faster payment platforms was important, and 90% said they expected to make and receive faster payments within the next three years, per a brief published by the Fed last fall. Payroll was the top use case cited for faster payments by businesses, which might be because of the potential employee retention benefits.
• More than half of US consumers (58%) said they’d use real-time payments, and 30% said access to real-time payments was a key factor when selecting an FI, according to a PYMNTS report. Like businesses, faster payments give consumers a better picture of their finances and help them avoid things like overdraft fees.

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