Dive Brief:

• FedNow has grown its list of participating U.S. financial institutions to more than 1,300 in all 50 states, according to a press release from the Federal Reserve Financial Services.
• The majority (95%) of institutions using the Federal Reserve’s real-time payments service are small to mid-sized banks, credit unions and financial firms, the April 16 release said.
• In the first quarter, FedNow settled about 1.3 million transactions, up 43% over the same period last year. Individuals and businesses, combined, sent $540 million through the system on a daily basis, on average, per the press release.

Dive Insight:

The number and volume of instant payment transactions have risen as more financial firms find new use cases for the service, Federal Reserve Financial Services said in the announcement. 

Among the popular transaction types executed via FedNow are off-cycle payroll, earned wage access, digital wallet funding, real estate escrow payments, online marketplace payouts and auto loan disbursements, the release said. 

“For us, adopting the FedNow Service early was about getting ahead of the game,” Cassandra Tucker, director of operations at ABNB Federal Credit Union, said in the FedNow statement. “We wanted to make instant payments available to our members as quickly as possible because it’s a more efficient and secure way to make transactions.” 

While FedNow has increased its participating financial firms, its budget has also grown. As of late last year, FedNow had signed up roughly 1,000 of the 9,100 U.S. financial firms. The Fed estimated last year that running the system this year would cost more than the $246 million spent on it last year.

As financial firms use FedNow’s instant payments service for more use cases, the Federal Reserve has made the service more useful by adding new features and raising the transaction limit. FedNow is doubling its transaction limit from $500,000 to $1 million this summer. Plus, credit unions and banks will get a new function at that time that lets them designate amounts and speeds at which defined customer segments can use the system

The Clearing House recently reported an uptick in volume for the rival, private RTP network. In February, RTP exceeded one billion payments, a milestone it reached 18 months after facilitating 500 million transactions, according to a Feb. 3 press release. The RTP network also set a single day records on Jan. 31, processing about 1.59 million transactions worth $1.44 billion that day, The Clearing House said.