The Federal Reserve said last week that its real-time system FedNow is “on the verge” of providing cross-border transaction “support,” but then it stopped short of saying how and when.
In a blog post on the FedNow website, the central bank suggested it’s advancing a proposal it made in April to let banks that participate in FedNow tap intermediaries, including non-U.S. banks, to send money. That would extend the faster service to cross-border transactions.
“Federal Reserve Financial Services is on the verge of unlocking a new frontier within the FedNow Service: cross border transaction support,” the Sept. 23 post said. “This marks an important milestone for FedNow participants and their globally active customers, allowing institutions to meet international needs while staying aligned with the payment standards shaping the future of the industry.”
Still, the first sentence above had an important footnote: Any such enhancement is contingent on “Federal Reserve governing bodies.” A spokesperson for the Fed declined to comment on when the Federal Reserve Board might vote on moving forward with the cross-border proposal.
Currently, FedNow can be used only for domestic money movement between U.S. financial institutions, but the proposal would allow its domestic service to be connected to other entities connecting internationally.
With stablecoin developments increasingly opening new international payment possibilities, companies are racing to offer cross-border services that improve what has long been a slow, expensive and complex process for moving money across borders. Fintechs, such as Remitly, have entered the fray to offer cross-border payment services, challenging established players, like Western Union.
For instance, Citibank, a unit of Citigroup, said in a press release Tuesday that it is pressing ahead with improved cross-border service by way of an improved system from Swift, the Belgium company that is a key player in connecting banks internationally. Last year, Swift embarked on a plan with 40 banks, to create new standards and formats to speed up payments and make their settlement more predictable.
With the Fed’s April proposal, the central bank solicited public comments on the prospects of extending FedNow for international use. Since then, the feedback has been largely positive from payments players, including card network Visa, cross-border firm Wise and digital payments processor Stripe.
In its post, the Fed said that “a group of organizations will soon test” FedNow for sending and receiving the domestic leg of a cross-border transaction, without providing any dates. The central bank added that other financial institutions will “soon” have access to the FedNow cross-border option as well, again, without providing any details.
The post cited one company, Miami Beach-based Payall Payment Systems, which facilitates bank transfers in 130 countries, as taking part in the integration with FedNow.
“As commerce increasingly demands instant execution across borders, we’re proud to support the infrastructure that makes this possible for our clients and their customers,” the company’s CEO, Gary Palmer, said in the post.
The FedNow post comes as industry eyes turn to Miami, where Swift is hosting its annual Sibos conference. Swift, which is short for Society for Worldwide Interbank Financial Telecommunication, has been connecting banks around the world for international money transfers since 1973. The conference is held in different parts of the globe each year.
At the conference this year, there has been a lot of discussion of artificial intelligence, said Priyanka Rath, who is head of liquidity and account solutions for North America in JPMorgan Chase’s payments arm.
Companies are “using AI tools to make sure that we are validating the format of payments, and where they're originating, and if there are any errors that need correction,” she said in an interview Monday.
FedNow has attracted participation from upwards of 1,800 banks, including JPMorgan Chase and Citibank, since it launched in mid 2023.
