Does your bank participate in FedNow?

FedNow (Wikipedia article) is an instant payment service developed by the Federal Reserve for depository institutions in the United States, which allows individuals and businesses to send and receive money.  FedNow is intended to be faster and less expensive than other traditional ways that banks in the US send money to each other.  FedNow is instant, which is better than the delays of hours or even days for ACH and bank wire transactions.  Bank customers, including businesses and individuals, can benefit greatly from FedNow.  Does your financial institution participate in FedNow? 

The service launched on July 20, 2023.  Surely now, after a year, your financial institution participates in FedNow.  Right?  (See list of participating financial institutions here.)  Nope.  I checked every bank that I use regularly, and every bank that my firm uses regularly, and not one of them participates in FedNow.  But yes, as of today there are 969 financial institutions that participate in FedNow.

Just spot-checking with some bank names that many readers will recognize, here are some banks that presently fail to be participants in FedNow:

• • Bank of America
  • BMO
  • Charles Schwab
  • Citibank
  • Community Federal Savings Bank (the bank used by Wise)
  • FirstBank (the one in Colorado, Arizona, and California)
  • Goldman Sachs Bank
  • HSBC
  • Morgan Stanley
  • PNC
  • TD Bank
  • Truist Bank
  • USAA

Just now I wrote a letter to each bank that I use regularly, and to each bank that my firm uses regularly, letting them know that I am disappointed that they have not yet become a participant in FedNow.  I invite you to do the same.

What about Zelle?  One reader asks whether FedNow is like Zelle (blog article)?  Zelle, when it is available, is instant and most banks that participate in Zelle do not charge a fee for its use.  But many banks that participate in Zelle make it available only for individuals, not businesses.  And many banks that participate in Zelle place low limits on the number of dollars that may be sent or received.  Note, too, that Zelle only works if the particular accountholder who is the would-be recipient has taken the positive step of signing up as a participant in Zelle.

What about Paypal and Venmo?  These services, like Zelle, only work if the particular accountholder who is the would-be recipient has taken the positive step of signing up as a participant in the system.

What about RTP?  RTP means Real-Time Payments and is provided by TheClearingHouse.  A money transfer from one RTP bank to another RTP bank can be nearly instant.  Many of the banks listed above as failing to participate in FedNow do participate in RTP.  As of today’s date, 609 financial institutions participate in RTP.  (USAA, listed above, also fails to participate in RTP.)  Keep in mind that there are good reasons why a bank ought to participate in FedNow even if the bank also participates in RTP, because it takes two to tango.  For any given proposed money transfer to succeed, it is necessary that both the sender and the recipient participate in the same transfer system.  There are many hundreds of financial institutions that participate in FedNow (with 969 members) but not in RTP (with 609 members).

I stumbled upon a very helpful comparison of US domestic money-transfer networks.

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