Every company that moves money is keeping a close eye on FedNow, the team at Plaid notes in a blog post.
Plaid explains that firms expect instant payments for every use case, but the reality is “that the market isn’t quite there yet.”
However, there are certain reasons why everyone involved in payments should be getting excited about FedNow, according to Plaid.
- More real-time payment coverage: FedNow has the capability to expand real-time payment coverage to every eligible financial institution, which gets us closer to ubiquitous, 100% availability—although we are not there yet.
- New network: This is the first new major payment rail since Real-Time Payments (RTP) was released by The Clearing House in 2017, and the first new payment rail from the Federal Reserve Banks since FedACH, which goes back to the 1970s. It’s not often that a new rail gets released, not to mention one that holds the promise of instant bank payments.
- More instant liquidity: What people are most excited about is the ability to send and receive instant payments at a scale never seen before. The true promise of FedNow is to turn bank accounts into something like electronic cash—instantly liquid value always at your fingertips with no settlement delays.
While FedNow is officially out and available on Plaid Transfer, it will take time “to grow into a widely accepted payment rail.” In the meantime, companies will need “to adopt it alongside other bank payment rails, including ACH and RTP.”
This doesn’t mean you need “to have three different service providers, one for each rail.”
Plaid Transfer offers a single integration that can “connect your business to all three rails, offering the best available coverage for ACH (both same-day and standard), Real-time Payments (RTP), and FedNow.”
The other advantage is that you only “need one authentication for all three rails. Users connect their bank accounts through Plaid Link, which offers a fast and familiar user experience (1 in 3 US adults has connected an account this way).”
Once connected, Plaid routes payments “to the most accessible instant payout rail between RTP and FedNow; or you can choose to send a payment via ACH.”
The future of modern bank payments is “being built as a collective between companies like Plaid, their customers, and payment rails like RTP and FedNow, but we are still in the transition phase.”