The Federal Reserve’s FedNow Service launched in July 2023, enabling eligible U.S. depository institutions of various sizes to build and deliver instant payment solutions to their customers.

Today, hundreds of institutions are on the network, and the number is growing daily. Many community banks have already implemented the service to gain a competitive edge and improve customer experience.

“Our customers count on us when they have important and time-sensitive payments to make, and instant payments will be another tool in our toolkit,” said Blayne Furey of Freedom Bank.

Instant payment use cases

The possibilities are endless, but there are several key instant payment use cases that community banks and others say are especially relevant for their customers. 

“One of the biggest use cases we see is for loan payments,” said Kevin Olsen of Pidgin, a secure real-time payments platform and certified service provider of the FedNow Service. “We want to give financial institutions the ability to collect and process loan payments instantaneously so it's beneficial for both sides. That means no heartache over late fees or penalized credit scores for consumers.”

Earned wage access and payroll are also key instant payment use cases.

“Payroll is one we see for obvious reasons,” said Mark Majeske of Alacriti, a fintech that’s certified to support payment processing for FedNow participants. “If you are a rideshare driver, for example, and can get paid at the end of your shift, it’s a great benefit if you need that money to pay your bills on time.”

Organizations cite request for payment as a tool that can help small businesses automate payables systems.

“In my opinion, our client base will benefit the most from request-for-payment use cases. Small businesses need the ability to send an invoice with their request and have that request and invoice returned to them with the correct information,” said Malinda Rickel of The Bankers’ Bank.

Organizations see value in a variety of use cases and are looking ahead to those that will likely gain traction.

“One can envision a day when a customer is at a retailer waving their phone over a device to move a payment using new instant payment rails instead of card rails,” said Rob Ames of Salem Five Bank. “It could be a sea change for how merchants accept payments and how consumers interact with those payments.”

Insurance and government transactions are also of interest to the industry. Notably, the U.S. Department of the Treasury was among the first early adopters of the FedNow Service.

Looking ahead

The use cases above only scratch the surface. As it’s done in the past, the industry will collaborate to innovate and create solutions that support a variety of use cases.  

“I truly think that the market will find applications that solve issues for our customers and for the industry as instant payments become more commonplace in daily life and business,” said David Long of Bryant Bank.

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