The Federal Reserve Board is seeking public comment on a proposal that would allow U.S. banks and credit unions to use intermediaries to transfer funds through the FedNow Service.
FedNow, an interbank real-time gross settlement service that supports instant payments in the United States 24 hours a day, seven days a week, 365 days per year. Currently, FedNow participants may not use intermediaries other than the Federal Reserve banks for a funds transfer sent through FedNow. This means that a funds transfer sent through FedNow can include only two U.S. banks other than a Reserve Bank. This has meant that the service can be used only for domestic payments because participating banks located in the United States have been unable to send payments to additional banks outside of the United States.
The new proposal would create added flexibility to support new private sector use cases for the FedNow Service. For example, it would allow U.S. banks to use FedNow to transact with correspondent banks to facilitate the international portion of a cross-border payment.
The proposed amendments would also align FedNow with Fedwire, which has permitted intermediaries for decades. It should be noted that the changes would not alter the payment flow between FedNow participants or change which entities can connect to the service. Like Fedwire, the amendments would simply allow additional transfers before and after funds are sent through FedNow, enabling participants to settle the U.S. domestic portion of larger cross-border transactions.
Comments are due within 60 days after it is published in the Federal Register.