Federal Reserve Proposes Enhancements to Interbank Fund Transfer Systems
Fed Proposes Expansion of its Real-Time Payments System
The Federal Reserve has released a proposal that could significantly alter the way US banks and credit unions transfer funds through its real-time payments system, known as FedNow. According to the plan, intermediaries would be allowed to facilitate transfers through the system, potentially expanding the number of banks involved in a single payment.
Under the current system, a transfer of funds sent through FedNow can include only two US banks. The proposed expansion would provide lenders with additional flexibility in how they transact with other banks to facilitate the international portion of a cross-border payment. This move aligns with the central bank's efforts to streamline certain functions for banks and eliminate inefficiencies.
The FedNow payments system debuted in 2023, designed to speed up the movement of money among banks around the US. The system allows eligible banks with accounts at the Fed to send money instantly. The proposal, which is subject to public comment before it can be finalized, aims to provide lenders with greater flexibility in managing international payments.
| Current System | Proposed Expansion |
|---|---|
| 2 US banks per transfer | Multiple banks per transfer (with intermediaries) |
| Limited flexibility in international payments | Greater flexibility in international payments |
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