iStock illustration

The Federal Reserve has narrowed the expected time frame for the launch of its instant payment platform, FedNow Service, but its debut is still at least two years away.

The Federal Reserve said in a statement yesterday that FedNow Service will launch in 2023, narrowing the delivery expectation originally set by the Fed, which in 2019 had said the service would be available in 2023 or 2024.

“Over the last several months, we’ve made significant strides toward our program milestones for the FedNow Service,” Esther George, president and CEO of the Federal Reserve Bank of Kansas City and executive sponsor of the FedNow program, said in the statement. “Based on the FedNow team’s progress, we are pleased to share this updated timeline so the industry can continue to prepare for the adoption of FedNow.”

FedNow is an end-to-end instant payment service that will provide banks and credit unions with infrastructure to let individuals and businesses make real-time payments.

The Federal Reserve said it has expedited FedNow’s launch by taking a phased approach to the service. The initial launch will include core clearing and settlement functionality, as well as features such as a request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions.

Later updates to the system will augment and enhance the service’s features, the Fed said.

“We are working hard to respond to the industry’s call for urgency and growing demand for the service, which is evident in the widespread response to our call for pilot participants,” Kenneth C. Montgomery, Federal Reserve Bank of Boston first vice president and chief operating officer and FedNow program executive, said in the statement. “As part of our commitment to transparency, we will continue to provide updates and further narrow our launch window as we achieve additional program milestones.”

Last week the Fed had announced that more than 110 organizations would participate in FedNow’s pilot program.

“The pilot program will support development, testing and adoption of the FedNow Service, as well as encourage development of services and use cases that leverage FedNow functionality,” the Fed said in a statement last week. “A key objective in selecting participants for the pilot was to ensure diverse representation across financial institutions and service providers, connection types, settlement arrangements and experience levels.”

Pilot participants include banks, credit unions, core providers and financial technology companies. Some of the organizations selected include Salem Five, Citizens Bank, Silicon Valley Bank, JPMorgan Chase, Fidelity Information Services, Fiserv and Jack Henry.

Atlanta, Georgia-based VSoft, a digital banking payments company, is one of the fintechs chosen to participate.

“VSoft is privileged to take part in the FedNow pilot program,” Abhishek Veeraghanta, vice president of marketing and product management, said in a statement. “The vote of confidence from the Federal Reserve and the prospect of bringing technology that we’re passionate about to financial institutions around the country excites us as we look to shape the next chapter of payments.”