First Internet Bank has announced its participation in a pilot programme for the FedNow Service, the Federal Reserve’s instant payments network. This collaboration further evidences a commitment to digital banking and faster payments on the part of First Internet Bank, the nation’s first state-chartered, FDIC-insured institution to operate entirely online.
The FedNow Service is an instant payment service with the aim of providing a safe and efficient instant payment service for financial institutions across the US. The Service is aiming to be launched to the public in 2023, with the pilot programme testing different features and developing fully before its release. The Service aims to provide businesses and individuals with the ability to make time-sensitive payments, as recipients will receive the money within seconds, allowing institutions and providers to provide innovative instant payment services to customers.
The FedNow Service alleviates pain points often associated with instant payments for consumers, small businesses and financial institutions:
- Consumers will have more control over their personal finances, with the ability to avoid late fees and overdrafts, as payments and bills can be made on the due date, rather than days ahead.
- With real-time payments, small businesses receive funds immediately, increasing cash flow and significantly reducing the cost of checks and payment processing fees.
- Financial institutions will derive benefits associated with safe, efficient instant payments.
“Since its inception, First Internet Bank has sought to deliver a more flexible banking model to meet the evolving needs of our personal and small business customers,” said Anne Sharkey, SVP of Operations. “Our participation in the FedNow pilot allows us to bring two decades of leadership in the industry to foster change within the instant payment sector.”
Sharkey further commented saying, “The FedNow Service benefits both consumers and small businesses, giving consumers and small businesses real-time insights about where they stand in terms of actual funds in their accounts. Additionally, FedNow provides consumers with a truly instant payment option, so they can easily avoid late fees and overdrafts, while allowing businesses to receive funds immediately, eliminating the use of checks and avoiding certain processing fees.”
In its role, First Internet Bank will help shape the pilot programme’s features and functions, provide input into the overall user experience and ensure readiness before the programme debuts.
The Federal Reserve has direct connections with more than 10,000 banks allowing all parties, including smaller financial institutions, to benefit from the FedNow Service.