As more banks across the country join the FedNow Service, instant payments continue to gain traction, allowing people and businesses to make payments in seconds around the clock, any day of the year.
Some community banks join the FedNow Service as receive-first participants with plans to enable send later. Others are maximizing the value that instant payments can offer by enabling send right away.
The benefits of sending now
Allowing your customers to send instant payments opens opportunities for your community bank to gain faster, stronger return on investment, beyond what receiving instant payments can offer. For example, you can:
- Provide better customer service through the transparency and convenience of instant payments
- Retain or gain customers seeking send capabilities
- Discover more revenue generation opportunities than with receive only (such as new loans)
- Reduce costs associated with processing higher-touch transaction types (such as checks)
- Gain operational efficiencies and reduce manual interventions (e.g., convert small-dollar wires to instant payments)
- Generate new fee income through send monetization strategies
You’re in control
With the FedNow Service, banks have significant control and the ability to take a measured approach while ramping up their schedules. Here are a few ways to ease into sending transactions:
- Pick an initial set of customers. You don’t need to allow all customers to send right from the start. Consider choosing a subset — like a certain portion of your business customers, for example — that makes the most sense for your business from a strategic and risk management standpoint. Enabling specific segments allows you to adjust controls and strategies early and then slowly expand to more of your customer base.
- Select lower-risk send use cases. Think about the use cases you’ll enable and which of them might be lower risk. Some participants start with transactions they initiate themselves, such as with loan disbursements or paying associates or vendors. You can also start by allowing customers within your bank to send to each other. Once you build confidence with these use cases, consider expanding to others.
- Leverage existing operational and technical capabilities. Determine which fraud risk management capabilities you’re already using for other payment types that might also be relevant for instant payments — chances are you already have some of these controls in place. From there, identify any gaps that may exist and make upgrades and modifications as needed.
- Collaborate with other trusted banks. Think about other banks you know and trust that are sending and receiving transactions over the FedNow Service. Consider working together to identify early use cases or customer segments you could allow to send and receive between your institutions. This collaboration may also help your organization predict volume and forecast liquidity.
- Work with service providers and vendors. The right partners can provide valuable experience and insight, and help you implement fraud risk management and instant payment capabilities so you can stay vigilant and innovate as needed.
To learn more, read this discussion between FedNow participants on their experiences and tips for enabling send.
