Money moves through the U.S. payments system every second of the day. One key part of that system is the FedNow® Service, the Federal Reserve’s instant payment rail. Launched in 2023, it enables financial institutions to move funds instantly – 24/7, 365 days a year. While FedNow is focused on domestic payments, the Fed is also exploring how it could eventually help make cross-border payments faster and simpler.

In this Six Hundred Atlantic episode, Executive Vice President and Chief FedNow Executive Nick Stanescu discusses why FedNow was created, how it works, and what it could mean for businesses, consumers, and the future of financial access.

Allison Ross:

The U.S. payment system touches nearly every part of our daily lives. It's how paychecks arrive, how bills get paid, and how money moves through the economy every second of every day. What's less visible is the role the Federal Reserve plays behind the scenes. The Fed doesn't make consumer-facing apps and it's not a commercial bank, but it is the backbone of much of the nation’s payment infrastructure — the pipes that keep money flowing safely and reliably — and that includes supporting newer, faster ways to move funds.

To do that, the Federal Reserve developed the FedNow Service, its 24/7 instant payment infrastructure. It was launched in 2023, and it represents the Fed's first new U.S. payment rail in half a century. And in the coming years, the FedNow team hopes to expand its capabilities even further, including exploring options for cross-border instant payments and transactions.

So, what does it do? Why was it created, and how might it shape the future of banking and financial access?

I'm your host, Allison Ross, and this is Six Hundred Atlantic, a podcast produced by the Federal Reserve Bank of Boston. Today, I'm joined by Nick Stanescu, executive vice president and chief FedNow executive, who's been closely involved in the development and rollout of FedNow. We'll talk about how it works, who's using it, and why it could play an important role in modernizing the way money moves in America.

Welcome to the podcast, Nick.

Nick Stanescu:

Thank you for having me, Allison.

Allison Ross:

Let's start with just the basics. For those who don't know, what is FedNow?

Nick Stanescu:

Let me paint you a picture. Think about the last time you needed to send money to someone urgently. Maybe you are splitting rent with a roommate or paying a contractor or maybe sending some funds to your— some money to your nephew. With traditional banking, that money could sit in limbo for hours, maybe days, but FedNow changes that completely. So, what it is, FedNow is the Federal Reserve's instant payment service. And when I say instant, I really mean instant, money moving in seconds, not hours or days. It works 24/7, 365, holidays, weekends, 3 a.m. on a Tuesday, it doesn't matter. When somebody sends a payment, the recipient has full access to those funds immediately, literally within seconds.

Allison Ross:

A lot of people assume their payments are instant, but you're saying they're not truly instant. So FedNow is something different.

Nick Stanescu:

Yeah, I would say FedNow is something different and also something very, very unique. And here's what makes it different. This isn't just another payment app. We do not provide payment services directly to consumers or businesses. FedNow is this underlying infrastructure.

Allison Ross:

So, how exactly does it work?

Nick Stanescu:

Well, it's actually pretty elegant. As a consumer, you might see this as an instant transfer selection on your banking mobile app when you're looking to move money from one account to another, for example. So, when somebody sends a payment through their bank, the bank sends that request to FedNow. We clear and settle it between the banks in real time, literally adjusting their accounts on the spot. And then boom, the recipient has access to their money within seconds, 24/7, 365. And what does that mean? That means that for organizations, that means fewer delays, tighter controls over liquidity, and the ability to build services and consumer experience on top of FedNow. So, think about this as something extremely powerful for businesses, which is cashflow with less friction. I think the same is true for consumers as well.

Allison Ross:

So, this is for institutions, not individual consumers?

Nick Stanescu:

That's right.

Allison Ross:

And FedNow was launched in July of 2023. So, when it was released, FedNow said that it was the first new Federal Reserve payment rail in 50 years. A question some might have is what is a payment rail and how does it compare to other payment rails, things like a wire transfer that someone might more commonly know?

Nick Stanescu:

So, a payment rail is essentially the underlying infrastructure that moves money from one financial institution to another. Imagine the Fed as the nation's railway system, but for payments. We built and maintained the tracks that banks and credit unions then travel onto and move money around the country safely and efficiently, right? So different railways support different types of payments. And we're talking about some massive scale here. Every single day, the Fed moves around $5 trillion across these rails. That includes ACH, that includes wire transfer, cash services, and of course the latest, which is instant payments via the FedNow Service. And this is huge for Treasury teams.

For example, it means that they have a domestic real-time settlement option that is designed specifically to handle everyday operational flows, liquidity movements, supplier payments, emergency disbursements, and customer payouts. Maybe one thing I would say about this is also that each rail has its purpose. And I think having options when it comes to payments is important for both consumers and for the businesses. But FedNow does fill this longstanding gap, I would say, in payments, enabling real time payments for broad U.S. market with the reach, resilience, and accessibility of the central bank behind it.

Allison Ross:

Right, so there’s a level of trust there. Thanks for that. Now, going back to the start, what gaps or challenges were you trying to solve with FedNow.

Nick Stanescu:

FedNow wasn't something that we dreamed up in the vacuum. The industry told us that they needed this. Financial institutions came to us saying, "Hey, we need a faster, modern way to move money when our consumers need it." So back to your question, we had three objectives in mind. First, enable instant payments nationwide. So true 24/7, 365. Second, make it accessible to institutions of all sizes all over the U.S., so not just the largest banks. And third, build it with safety and reliability you'd expect from the Federal Reserve. And now, why did this matter so much? When money doesn't move in real time, that creates cashflow problems for businesses and for individuals, frankly, waiting through the weekends, holidays, or cutoff times just to access funds.

FedNow eliminates that waiting game. Instead of funds sitting there in limbo, businesses and consumers can get access instantly to their working capital. So, businesses can turn waiting time into working time. And here's why this is very exciting. With FedNow's underlying infrastructure, banks and credit unions can now build on top of this infrastructure. Right, so new features on their mobile apps, enhance business payment tools, better customer experience. So, it just delivers a lot of value to them and in turn delivering that value to their customers. So bottom line here, FedNow is bringing our payment systems up to speed with the rest of our digital lives. So real money for real world needs.

Allison Ross:

And how is the Boston Fed involved in this?

Nick Stanescu:

FedNow sits within the Federal Reserve Financial Services group, and that's the group that runs critical national infrastructure like ACH, wire, and check processing. But FedNow specifically, those are teams from multiple Fed districts, including a large contingent from right here in Boston that collaborated on everything: building the technology, designing the operational frameworks, working with the banks and industry to make sure that FedNow, once it goes into market, solves real problems. And the way I see it, we're not just building a payment system. We're laying the foundation for the next generation of financial innovation in this country and helping industry at large understand the benefits of instant payments. And that's happening here in Boston and that's happening all over the nation.

Allison Ross:

So how does FedNow compare to other real time payment platforms, both here in the U.S. and also abroad? And then, touching on just what you were talking about, what sets it apart in terms of speed, accessibility, or infrastructure?

Nick Stanescu:

Yeah, so let me tell you what makes FedNow unique rather than getting into comparing specific platforms. And maybe I'll hit on three things. First, FedNow is a public network. So, it is developed and operated by the nation’s central bank, and that matters because we designed this to expand access to instant payments to banks and credit unions of all sizes. And that creates more choice, that creates more competition, and ultimately, a more resilient payment ecosystem for everyone. Second, is the infrastructure itself. FedNow is built on modern, cloud-based or always on infrastructure, right? And that was designed for the way today's businesses operate, which is, again, 24/7, 365. So, no weekend, no downtimes, no holidays, no cutoff times.

And because it is tied to the Federal Reserve systems, you get that speed also with the security and resilience that you expect from the central bank. So, it's really built for how businesses actually operate today.

And third, and maybe one of the most exciting parts also is where we're headed. Right now, FedNow handles domestic instant payments only, but in the coming years or so, I wouldn't be surprised if participants will also be able to process cross-border payments and transactions. I'm not going to get too technical here, but we're thinking about some of the proven models from Fedwire Fund Service to also make FedNow a gateway for international payments activity. And that's really exciting because also these global use cases are being driven by our participants, by the market itself.

Allison Ross:

Wow, instant cross border transactions would be an exciting evolution. Now, I have to ask, since the launch have there been any surprises or lessons learned?

Nick Stanescu:

Well, launching something this big always comes with surprises, and certainly, FedNow is no exception. One of the biggest lessons has been the importance of education and readiness. So, the technology works beautifully, but institutions need time to adapt and they're shifting decades-old processes to work in real time, and that definitely doesn't happen overnight. So ongoing support and guidance has become absolutely critical to their success. What really surprised us, and I will say in the best way, was the enthusiasm from community banks and credit unions. We knew there'll be interest, but the response from smaller institutions has been incredible. It validates why broad accessibility was built into the service from day one. And here's what gets me excited, I think the sheer variety of ways that organizations are using FedNow. We're seeing anything from Treasury teams, moving liquidity instantly, from businesses paying suppliers in real time. We're seeing emergency disbursements hitting accounts within seconds, and that diversity of use cases tells us that we're onto something here. And businesses don't just need fast payments. They need flexible fast payments that work for their specific operational needs, and that's exactly what we're seeing play out in the market.

Allison Ross:

Where do you see the biggest opportunities for growth? Are there certain industries, regions, or use cases where adoption is really picking up?

Nick Stanescu:

Yeah. Well, it's really been remarkable to watch the momentum build behind FedNow. We're only a couple years in and the network is definitely taking off. Volume grew last year, 450% year over year, which tells us institutions aren't just joining, but they're actually using it in meaningful ways. We now have more than 1,600 participants live on the network, plus close to 50 service providers that are helping banks and credit unions plug in. I also love the mix of participants. We got the largest banks in the country right alongside the community banks and credit unions from all 50 states, but about 95% of the network is made up of those small institutions. It speaks to how everyone, regardless of size, wants to offer the same modern, always on payment experience to their customers, whether their customers are businesses or consumers.

Allison Ross:

We recently did a podcast on financial inclusion with Boston Fed researcher Brian Clarke, where we talked about how instant payments could benefit lower income communities. Since it's designed for businesses rather than individuals, how do you see it contributing to financial inclusion?

Nick Stanescu:

Financial inclusion was core to FedNow's design. And I know Brian well, we talk a lot about this. By making instant payments available nationwide, I think what we're doing is we're leveling the playing field for institutions of all sizes. So again, think about the real-world impact here. The restaurant owner that is restocking on a Saturday night, or the contractor paying a subcontractor to keep the project moving, with instant payments, that waiting period completely disappears. And we're seeing some meaningful use cases here related to financial inclusion, like for example, off cycle payroll and earned wage access, helping people get paid right after their shift, not just on payday, so they have immediate access to the funds that they earn so they can turn around and spend it on what they need most. And I think speed matters always, but matters the most, and especially in crisis.

And last year, we saw the very first federal disaster relief payments flow through FedNow via Treasury's digital pay program. Getting funds immediately after a claim is approved, that's a game changer. So, while FedNow is built for financial institution, its real value shows up in people's everyday life ultimately.

Allison Ross:

Right. When people need money, they need it now. Where does FedNow fit into the bigger push to modernize U.S. banking and payments? And I'm curious how it connects to the Fed's long-term plans for the financial system.

Nick Stanescu:

I think FedNow sits right at the heart of modernizing how money moves in the U.S. The Federal Reserve has been working for years to make payments safer, faster, and more accessible. And FedNow really is at the center of that vision. And here's what's becoming clearer. Instant payments aren't just nice to have anymore. They are foundational. Institutions are already using FedNow to improve cash flows, like I mentioned before. They're using it to speed up supplier and payroll payments, to enable real time refunds. So, this demand is driving the modernization of payments. Maybe one thing to add here, because a lot of people think about FedNow and they think about speed, but FedNow isn't just about speed. It's also building a platform for the next generation of innovation. So, when every institution, whether it's a large bank or a community credit union, can offer instant payments that unlocks just new products, better liquidity management, and just a more flexible financial workflow for the businesses. And as demand for faster payments grow for instant payments, the industry will keep doing what it does best, innovating and moving the needle forward here.

Allison Ross:

I know you don't have a crystal ball, but if you could fast-forward five or 10 years, what do you think the future of banking and payments will look like? What should our listeners be paying attention to now that might shape how money moves tomorrow?

Nick Stanescu:

In my personal view, and not speaking for the Fed here, I think what we'll see is much deeper partnerships between financial institutions and FinTech providers. That's already happening, but I think it's going to accelerate. And in five to 10 years, I think speed will simply be assumed. Waiting for funds to clear will really feel as outdated as dial-up internet will feel today. And for banks, relevance is going to be defined by how well they transform, how well they leverage instant payments, and how they change instant payments into instant value, whether it's in real-time payroll, simplify supplier payments. But bottom line here is that instant payments won't be a differentiator when we look up ahead. It's just going to be an expectation.

Allison Ross:

What's on the horizon for FedNow? Are there any changes that could expand its impact or reshape how it's used?

Nick Stanescu:

Honestly, this is the part that gets me most excited about FedNow and looking ahead because we're still in the very early innings of what instant payments can unlock for financial institutions, for businesses, for consumers, for financial inclusion. One thing that we pride ourselves on is staying incredibly close to the industry. We keep a living roadmap for FedNow, so what does that mean? It's constantly being shaped by what financial institutions tell us. That means that the next wave of capability is really about unlocking more value, more control, and more innovation for the organizations using it. Short term though, we are very much, I would say, manically focused on driving broader adoption domestically. But as I mentioned earlier, we're also exploring how instant payments could reduce friction in cross border scenarios down the road. And what's ahead aren't incremental updates and upgrades, it's a continued modernization of how money moves in this country. And we'll keep collaborating with the industry, learning, leaning in, and leading where it's our role to do so.

Allison Ross:

Exciting things ahead. Thanks for joining us on the podcast, Nick.

Nick Stanescu:

Thank you.

Allison Ross:

Check out bostonfed.org/600Atlantic for more podcast interviews and seasons. An easy way to stay up to date on new episodes is to subscribe to our email list. There you'll be notified whenever a new episode drops. And please don't forget to rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app. I'm Allison Ross, and this is Six Hundred Atlantic. Thanks for listening.