Dive Brief:

• The Federal Reserve will raise the FedNow instant payments transaction limit from $1 million to $10 million in November, the agency announced Tuesday. 
• The higher limit allows financial institutions to customize transaction sizes for their own operations, based on their internal risk and business needs, the release said.
• FedNow has signed up about 1,400 U.S. banks and credit unions to use the real-time payments service for faster payments in the U.S., per the press release from the Federal Reserve Financial Services unit.

Dive Insight:

The Fed’s decision to increase the limit stemmed from rising demand from financial institutions and businesses, the agency said. 

Earlier this year, the Fed also rolled out newFedNow risk mitigation tools, including account activity thresholds, to enable financial institutions to tailor their instant payment capabilities to their needs and those of their clients. 

With the higher transaction limit, participating financial firms can use FedNow for higher value transactions such as internal fund transfers, corporate payroll, vendor payments and real estate transactions, the release said.  

“Our second transaction limit increase this year reflects the growing demand for instant payments — as the benefits of immediate funds availability for all types of payments become more apparent, financial institutions need flexibility to serve customers and support internal processes,” Mark Gould, chief payments executive for Federal Reserve Financial Services, said in the release.

Indeed, the demand for instant payments continues to grow. The number of financial institutions that have signed up for FedNow grew about 8% since the Fed’s April report that some 1,300 financial firms were using the system. 

The service settled roughly 1.3 million transactions in the first quarter, a 43% spike compared to the prior quarter. That growth continued in the second quarter when the service facilitated 2.1 million transactions, a 63% surge compared to the first quarter.

Still, FedNow faces stiff competition from The Clearing House’s RTP network. While FedNow processed $245.8 billion in second-quarter transactions, RTP handled $481 billion in payments during that period, nearly triple the amount it completed in the first quarter.