Real-time payments: FedNow

Now is the time to accelerate your strategy beyond transactions

The mid-2023 launch of FedNow has been a watershed in the evolution and adoption of real-time payments in the US, heralding a new phase of growth within the payments industry.

2023: A milestone year for real-time payments

Real-time payments in the United States saw unprecedented growth in 2023, driven in part by the rollout of FedNow in July, which is experiencing rapid uptake among financial institutions. Over 600 firms are using FedNow in various use-case scenarios at the start of February 2024, a 1,600% increase from the 35 institutions that were onboarded at launch six months earlier.

Real-time payments and dollar value continued to climb at a rapid clip last year. For example, The Clearing House reported that its RTP network handled 74 million transactions with a dollar value of $39 billion in the fourth quarter of 2023, an increase of 48% and 70%, respectively, from the fourth quarter of 2022.

Key use cases fueling real-time payments adoption

We are not surprised by that kind of growth. Cashless and electronic payments are expected to more than double globally between 2020 and 2030, according to PwC’s Payments 2025 and Beyond report.

The most common use cases for real-time payments in 2023 included peer-to-peer transactions, payroll for employees and bill payments for utilities, insurance and higher education. It is that kind of service that we have been anticipating businesses and consumers would gravitate to.

Are you ready for FedNow? Here are key considerations to prepare for and adapt to the evolving payments landscape

Benefits

For banking and financial institutions

  • Reduced costs (interbank settlement fees/late fees)

  • Better risk management

  • Efficient payment processing/settlement

For customers

  • Ability to transact and have funds available instantly

  • Real-time cash flow management

  • Enhanced fraud/cyber security operations

Strategic insights for 2024

The evolution of real-time payments is poised to continue, driven by changing consumer behavior and technological advancements. However, banks face several challenges, including regulatory alignment, technical infrastructure upgrades and return on investment (ROI). For example, in February, the Federal Trade Commission reported $8.8 billion lost in fraud last year by American consumers. An estimated $1.6 billion of that occurred during bank transfers and payments, double the $762 million lost in 2021.

Addressing these challenges requires a nuanced approach:

Responding to market demand to achieve ROI

Banks should zero in on creating value-added services that resonate with customer needs for immediacy and flexibility. Innovating around real-time payment solutions, such as Request for Pay (RfP) and integrating real-time payments into broader financial service offerings, can unlock new revenue streams. Additionally, leveraging analytics to offer tailored advice and services and ensuring robust security features can enhance customer trust and loyalty thereby boosting transaction volumes and profitability. Staying agile and responsive to market shifts and customer expectations will be key to securing a competitive advantage and maximizing ROI.

By embracing a step-by-step strategy for updating their payment infrastructure, banks can maximize returns and sidestep disruptions. The roadmap below shows why a well-thought-out plan is crucial for moving towards real-time payments. This approach aims at helping banks stay ahead, ensuring they not only meet the demands of today but lead the charge into tomorrow's financial landscape.

Real-time Payments Adoption Journey

Banks are at various points in the journey to considering new Real-time Payment offerings such as TCH-RTP and FedNow. PwC can help at any stage of the consideration process to help companies expedite adoption.

  • What payments challenges do our customers face?
  • What are the shifting customer expectations? (e.g., more real time)
  • What are the trends in the market to address customer needs?
  • What are the technology trends impacting payment ecosystems?
  • Where do we stand against our competitors in the market?
  • What capabilities do our competitors offer that we don’t
  • How can we enhance our current payment offerings to stay ahead of disruption?

*PwC has extensive experience assisting Financial Institutions with addressing/executing on considerations above

How PwC can help

With our deep payments expertise, PwC can support clients through every phase of real-time payments modernization. We can help accelerate the speed to market and execute a comprehensive real-time payments adoption strategy.

  • Market landscape and opportunity assessment 

  • FedNow Service readiness assessment 

  • Business case 

  • Payment solution stack mapping across

  • Customer journeys 

  • Business process and system capabilities 

  • FedNow payments capabilities 

  • Modern technical architecture 

  • Data architecture 

  • Infrastructure architecture 

  • Roadmap for target state 

  • Vendor assessment 

  • Implementation planning 

  • Risk and control assessments 

  • Payments engineering 

  • Financial crimes / AML solutions 

  • Quality engineering and E2E testing 

  • Scalable and automated non-functional tests 

  • System integration support 

PwC’s extensive experience across payments and technology projects for the largest institutions in the world can be leveraged to help guide your implementation of the FedNow Service.

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