By W.B. King
Launched on July 20, 2023, the Federal Reserve’s FedNow is an instant payment service that allows U.S.-based depository institutions to provide secure payments rails for individuals and businesses to send and receive money. To help credit unions better understand this critical innovation, Samaha & Associates recently published a white paper entitled, FedNow: The Future of Real-Time Payments — Why Credit Unions Can’t be Fast Followers.
“The purpose of this white paper is to educate and inform credit union executives on the benefits and challenges of adopting the FedNow Service, while underscoring the perils of deploying FedNow without proper due diligence, oversight and strategic planning,” CEO Sabeh Samaha told Finopotamus. The Miami Beach, Fla.-based technology and consultancy firm, he added, has proudly been serving the credit union industry for 26 years.
“To this end, the white paper will lean on industry research as well as share experiences from credit unions and credit union service organizations (CUSOs) that have successfully rolled out the FedNow Service to respective membership,” added Samaha, who co-authored the white paper with team members Adam Denbo, Tracy Helm, Olivia Reynolds and Nubia Valenzuela.
Invaluable Insights
Along with featuring topical industry research, Royal Credit Union's Vice President of Payments Jennifer Brantner, Aptys Solutions CEO Naseer Nasim and the company's Executive Vice President of Sales Eric Dotson provide valuable insights on respective experiences adopting and rolling out the FedNow Service.
“We asked ourselves, what’s the cost of not doing it,” Brantner noted. The $4.8 billion, Eau Claire, Wis.–based credit union, which supports more than 300,000 members at 26 branch locations, went live with the FedNow Service in September 2023.
“We weren’t the first, but we were an early adopter,” she added of the process that took less than two months to roll out. “We thought about whether to just do send or send and receive, so there are many methodical ways you can dissect FedNow that’s palatable and lets you do it at your own pace, but it’s important to also ask: Why you are adopting it and how it will best serve your members?”
Naseer explained that instant payments are reshaping the financial services industry. “These latest payment rails require real-time interoperability of banking solutions to support 24/7/365 banking. Integration between payments, core account processing, digital banking, fraud and risk management are key to making real-time banking a reality,” he said. “In another word, ‘open banking.’”
The Uniqueness of FedNow
FedNow, Nasim further explained, requires that the credit union’s core operating system is open and, at minimum, has application programming interface (API) connectivity. “The broad application of real-time payment for consumers, businesses, and government in 2024 and beyond is a game changer,” he noted in the white paper.
“Consumers, businesses, and financial institutions are demanding 24/7/365 service to move money swiftly and to have immediate access to their funds regardless of banks, applications, and vendors involved,” he continued. “The uniqueness of FedNow puts us in a completely new and different world than we have been putting up with for decades.”
Whether a credit union undertakes the FedNow adoption process under its own steam, works with a trusted technology consulting firm or partners with companies such as Aptys Solutions, the Samaha team said the writing is on the wall: Credit unions can better optimize the member journey and experience by deploying the FedNow Service.
To download a free copy of the white paper, FedNow: The Future of Real-Time Payments—Why Credit Unions Can’t be Fast Followers, click here.