The Future of Instant Payments: Our Conversation with Bernadette Ksepka of FedNow

What innovations are making their way to the payments space in the U.S.? How will the new FedNow Service impact the current payments infrastructure when it goes online in 2023? What can fintechs do to prepare themselves and get involved with a post-FedNow payments landscape?

This year at FinovateFall, we talked with Bernadette Ksepka, Assistant Vice President and Deputy Head of Product Development with the FedNow Service at the Federal Reserve System. With the launch of the FedNow Service drawing nearer, Ksepka helped put the challenges and opportunities in perspective.

On the promise of the FedNow Service

The Federal Reserve banks are developing an instant payment service for financial institutions of all sizes, across every community in the United States, to be able to offer safe and efficient instant payments to their customers, 24×7, 365 … Recipients of those funds are going to be able to have full access to that funding to be able to better manage their cash flow, to be able to make time-sensitive payments … In the back end, banks are going to be able to settle those transactions instantly instead of (in) hours or days. It will eliminate a lot of the liquidity and credit risk that exists today.

On the impact of FedNow on the payments landscape

The FedNow Service is going to modernize the U.S. payments infrastructure. It is really going to pave the way for a big change in the future of payments. It has been over 40 years since the Federal Reserve introduced a new payments rail, so we are super-excited that the FedNow Service is going to go live in the middle of next year.

On the innovation that FedNow may help unleash

The FedNow platform is use-case agnostic, so the possibilities are really endless. And as we’ve seen demand for instant payments grow, we’ve seen use cases expand and I think there are use cases out there that we are not even thinking about. For example, there’s a lot of energy around early wage access. Imagine an employer that can pay their employees at the end of the shift or at the end of the day instead of every two weeks. That makes that employer that much more competitive, especially in a really tight job market like we have today.

Check out the full interview with the Federal Reserve Systems’ Bernadette Ksepka on FinovateTV.

Photo by Fabrizio Verrecchia