The Federal Reserve’s instant payments system, FedNow, is live, allowing banks and credit unions to sign up for the real-time service, the central bank’s board announced Thursday.

"The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient," Fed Chair Jerome Powell said in a release. "Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid."

FedNow has been in the works since 2019 and stands as the biggest upgrade to the U.S. payments system in a half-century. It’s expected to not only speed up payments through banks, but also help the U.S. catch up with other countries, including India and Brazil, that already have such systems in place.

It’s a “big step” for the Fed to take in implementing the new system, said Reed Luhtanen, executive director of the Faster Payments Council, which has been investigating and advocating for speedier payments in the U.S. since 2018. The council has done that work alongside the Fed, which is a member of the organization. 

The Fed said it expects widespread use of the system to eventually allow workers to get paychecks faster and small businesses to be able to better manage cash flow.

While the Fed has pointed to July as the payments system’s launch month for some time, it had been mum about the exact date that it would flip the service on. So far, it has flagged 52 banks, service providers and other entities as being involved as early certification participants in the system. It has also been piloting FedNow with some of them since 2021.

Those involved as early adopters include JPMorgan Chase and the U.S. Treasury Department, as well as smaller banks such as Star One Credit Union and Bridge Community Bank. 

Service providers such as ACI Worldwide and the giant processors FIS and Fiserv were also certified early, as were some companies based outside the U.S., including Dutch payments processor Adyen and Swiss financial services company Temenos.

Payments professionals who have worked closely with the Fed on the system say they don’t expect the central bank to herald the start of FedNow with a lot of fanfare, but see the Fed saving that kind of celebration for a few months as the system works out any kinks. 

With that said, the Fed has been marketing the new service extensively for months, as it looks to attract banks and credit unions to sign up. The around-the-clock service promises to deliver payments in 20 seconds or less via bank channels, improving on processes today that can take hours or days. It has the potential to speed up not only bill payments but also business-to-business transactions.

Still, with nearly 10,000 financial institutions in the U.S., and only a relative handful now signed up to offer the service, there are no illusions about ubiquitous service happening any time soon. That may be part of the reason the Fed won’t be grandstanding about FedNow’s start.

“From their perspective, they don’t send out the message ‘mission accomplished’ just because they turned it on,” Luhtanen said.

The Fed signed up more than 100 companies and organizations to work on the pilot program over the past couple of years, and then further fine-tuned with a smaller number of entities seeking early certification to use the system.

For California-based Star One Credit Union, the development process has been a smooth one, said CEO Gary Rodrigues. The credit union was testing in what felt like a live environment last week. The Fed then shut that off this week as it began to prepare its system for the go-live date, he said in an interview.

“We always knew there were going to be some changes that we were going to have to make,” Rodrigues told Payments Dive. “So far, I think it’s gone well.”

Changes on the Fed end have been relatively “minor” tweaks — mainly with respect to the information the central bank was providing to participants of the new system, Rodrigues said. 

“It feels like a new product,” he said. “Overall, I think the Fed has done just an outstanding job.”

Star One is working with the Portland, Oregon-based digital banking services firm Tyfone to get its operations equipped to handle both the sending and receiving of instant payments on the new system, Rodrigues said. Many banks will start with receive-only, because that comes with less risk, specifically with respect to fraud, he added.

Star One’s Santa Clara County clients expect it to be more progressive and adopt the most innovative service possible, Rodrigues said.

The Fed is particularly keen to attract smaller U.S. banks to FedNow as they haven’t readily connected to the existing RTP real-time payments network available since 2017. Industry executives say smaller institutions have been less interested in that option because RTP is operated by The Clearing House, a company owned by their larger bank rivals. 

All in all, it’s a “great beginning” with a diverse set of financial institutions from banks to credit unions, Luhtanen said. That diversity is more important than the number of institutions participating early on because it will offer the Fed more diverse learnings based on the type, location and size of the institutions, with “lots of different perspectives,” he said.