FedNow is a real-time gross settlement (RTGS) service operated by the U.S. Federal Reserve, launched July 2023. It settles transactions individually in central bank money, around the clock, with funds available to the recipient within seconds. Banks of any size can connect; FedNow is independent of TCH's RTP network but interoperable in practice via dual connections.
The technical model, ISO 20022 messaging, and the role of FedNow in the U.S. instant payments duopoly.
Service architecture
FedNow is an RTGS service: each payment is settled individually and irrevocably in central bank reserves at the moment of authorization. There is no batch netting. The service runs 24/7/365 with sub-20-second target completion times.
ISO 20022 messaging
FedNow uses ISO 20022 (pacs.008 for credit transfer, pacs.002 for status). This allows rich structured remittance data - invoice numbers, line items, and references - alongside the payment itself.
Liquidity management
Because settlement is real-time, participating banks must pre-fund their FedNow position from their Federal Reserve master account. The service offers a separate Liquidity Management Transfer (LMT) channel to move funds between banks (or to/from joint accounts) 24/7.
Use cases and limits
Initial credit transfer limit is $500,000 per transaction (banks may set lower limits). Common use cases include payroll, just-in-time B2B payments, insurance disbursements, and account-to-account transfers. Request-for-Payment is a service feature, not a separate rail.
Frequently asked
Is FedNow the same as RTP?+
No. Both are U.S. instant payment rails, but FedNow is operated by the Federal Reserve and RTP by The Clearing House. Many banks connect to both.
What is the FedNow transaction limit?+
The service limit is $500,000 per credit transfer, though individual banks may set lower limits.
Sources & References
- U.S. Federal Reserve - FedNow Service
- U.S. Federal Reserve - Payment Systems Overview
- The Clearing House - RTP Network
External references are cited for context and discovery. CashlessTechnology.com is not affiliated with the listed organizations unless explicitly stated.