Large banks have offered real-time payments through P2P payment services such as Zelle and Venmo for a few years now. Credit unions and community banks were a little late to the game, but that is changing. More credit unions and community banks are adopting real-time payment services due to customer demand.
Now the Federal Reserve wants to get in on the real-time payment scene with their on real-time service called FedNow. However, the Fed is getting in well after the party has started and everyone has a dance partner. FedNow isn't anything new, at least on paper. The Fed initially drafted a real-time payment system back in 2013. It expects FedNow to go live in 2023-2024. The Fed is already well behind the curve in real-time payments. It's difficult to see how that will be any different five years from now when payment methods will likely have changed, leaving the Fed behind once again.
The U.S. lags in real-time payments. Other countries across the globe have been using ubiquitous real-time payment services for years. In fact, the U.K. began a limited same-day payment service in the 1980s and a full-fledged faster service in 2003, ten years before the Fed's paper initiative.
Will credit unions participate in FedNow? Offering FedNow will expand a credit union's real-time payment services to customers. But any new real-time payment service offering should be based on customer demand. Maybe FedNow will have some compelling benefit by the time it launches. But with it still in the proposal stage, it's anyone's guess. Another consideration is FedNow fees, which haven't yet been released.
One thing is certain — by 2023/2024, services such as Zelle and Venmo will be even more entrenched and will have evolved. Real-time payment services have proven to be the playground of fast and nimble fintechs, not slow-moving, bureaucratic government agencies.