With the FedNow Service now live, many financial institution leaders may be wondering how their bank or credit union can prepare to implement the service. After all, many financial institutions have already connected to the service and are actively supporting live transactions today.
Through the FedNow Service, Pidgin is equipped to offer banks and credit unions access to instant payments, helping them remain competitive by delivering best-in-class service for their customers and members. Pidgin is among the first service providers actively facilitating transactions for financial institutions on the service. We are already supporting several of our existing financial institution clients, including correspondent banks and corporate credit unions, offering instant payments with the FedNow Service.
It’s important to remember that each financial institution’s path to the FedNow Service will be unique. However, there are some common key decisions and activities many organizations should pursue as they look to provide their customers with this new, instant payment service.
Here’s an overview of five common phases of the FedNow Service journey:
Learn — Get to know the basics about instant payments and the recently launched FedNow Service. The Federal Reserve has published variety of resources designed to help financial institutions, as well as service providers understand the new service and how it can benefit their organization.
Engage — Delve deeper into how instant payments can impact your organization and its customers and members. This is another area where the Federal Reserve’s FedNow resources can help, thanks to content that explores the benefits and specific use cases for faster payments. The first release of the FedNow Service provides core clearing and settlement capabilities and certain value-add features, like request for payment and remittance information to support a range of use cases, including those that are expected to gain initial traction such as Account-to-Account transfers and Consumer-to-Business bill payments.
Prepare & Commit — Start preparing for instant payments and assess your organization’s readiness for the change. As your institution prepares to adopt and implement the FedNow Service, review key operational details, including expectations, requirements and guidance for FedNow participants on the use of the service.
Onboard — Sign up for the FedNow Service and go through the onboarding process.
Go Live — Be ready to send and/or receive transactions. You will want to run test transactions first – perhaps between your financial institution and a few select stakeholders – before going live with customers.
No matter where you on your journey today, there are resources to help. The 6 Phases of the FedNow Service Journey serves as a quick reference guide and is a good place to start. In addition to the Federal Reserve’s resources, a technology partner like Pidgin with a deep knowledge of not only FedNow, but also of the wider payments landscape can be invaluable.
If you’re past the early phases of your journey and are now moving toward the commit phase, there are several key decisions and capabilities your institution will need to finalize to ensure a smooth onboarding process. Your financial institution will need to answer the following questions.
How will you connect — through your own FedLine Solutions connection or a service provider’s connection? This is the perfect stage to connect with a technology partner like Pidgin, who is certified with the FedNow Service. Pidgin serves as a central connection point to the FedNow Service, along with other faster payment networks, allowing financial institutions to easily deliver instant payment options to their customers for a variety of use cases.
To be certified, a service provider has to successfully complete a comprehensive curriculum that includes the ability to process ISO 2022messages, and has validated they can successfully operate in a 24x7x365payments environment. Pidgin as completed all of this, so your team can trust our expertise as a strategic partner.
Where will you settle — in your own Federal Reserve Bank master account or through the master account of a correspondent?
How will you participate — will you receive only? Or will you send and receive through the network? Pidgin can help guide you through this process. In fact, our payments platform is one of only six certified service providers who can do it all, including send and receive real-time payments, receive request for payments, and conduct liquidity management transfers. Whatever route you decide to take, we can support it.
Are you ready for real-time posting? — Have you assessed your operations and technology and made any necessary upgrades or changes?
To ensure that your financial institution has the necessary infrastructure in place for the FedNow payments service, review your existing systems and processes. Make sure that your financial institution has the ability to connect to a real-time payments system or network, such as FedNow, either directly or through a payments service provider such as Pidgin. Additionally, you may need to evaluate whether your current core banking system can send and receive payments and instantaneously credit or debit account holders.
Also, consider how the FedNow service will impact customer-facing interaction points and internal staff. Does everyone have the tools and support they need, or will changes or additional training be necessary?
Take steps today to make sure your organization is ready for instant payments. For more information about the FedNow Service and how to prepare for it, you can visit FedNowExplorer.org and contact our team for details on how to implement the FedNow Service at your organization.