The Federal Reserve Banks announced in early 2021 that partners from the FedNow Community, including UMB Bank, will participate in the FedNow Pilot Program to support the development and adoption of the FedNow Service, an instant payments service that is expected to go live in 2023-2024. Learn more about the FedNow Service and UMB’s role in the pilot program below.
What is the FedNow Service?
The FedNow Service‡ is a new instant payment service that the Federal Reserve Banks are developing to enable financial institutions of every size, and in every community across the U.S., to provide safe and efficient instant payment services in real time, around the clock, every day of the year.
Individuals and businesses have payment needs that span well beyond traditional banking hours. The FedNow Service will modernize the U.S. payment infrastructure and provide a range of benefits to our consumer and commercial customers. Through participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments conveniently, and recipients will have full access to funds within seconds, giving them greater flexibility to manage their money and make time-sensitive payments. The FedNow Service allows UMB to continue to meet customers’ demand for innovative instant payment solutions.
What other benefits do instant payments offer?
The flexibility of instant payments is important now more than ever. Instant payments help individuals and households on tight budgets avoid the need to use fee-based check cashing services, worry about high-cost borrowing or incur overdraft or late fees. Likewise, immediate access to funds and the ability to instantly pay bills will help small businesses steer clear of costly short-term financing.
What is the pilot program?
The pilot program will support development, testing and adoption of the FedNow Service. Additionally, it will encourage development of services and use cases that leverage the FedNow Service’s functionality. For the pilot, the Federal Reserve selected participants that ensured a diverse representation across financial institutions and service providers.
In addition to more than 110 financial institutions participating in the pilot program for the instant payments offering, more than 80 organizations who provide payment systems and services for financial institutions and end users are interested in implementing instant payments to meet business and consumer needs. In response, the Federal Reserve is creating an “ecosystem participant” program beginning later this year. Participants in this program will coordinate with financial institutions to support end-to-end testing of FedNow Service solutions.
What is UMB’s role in the pilot program?
UMB Bank will serve in an advisory role for the pilot program through 2021. During this initial advisory phase, our input will help to further define the service and adoption roadmap, industry readiness approaches and overall instant payments strategy for the FedNow Service. Our participation in the program will provide insights that will directly solve our clients’ instant payments needs and shape the foundation for the next generation of payments services.
If you are interested in learning more about how UMB can help your business as a financial partner, visit our website.
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