CHICAGO – Starting in November, the Federal Reserve’s FedNow Service will raise its network transaction cap tenfold, from $1 million to $10 million—a move expected to expand high-value payment options for financial institutions and their commercial clients.
The change, reported by Federal Reserve Financial Services, is aimed at meeting rising demand for faster, larger transactions and supporting new business use cases.
“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,” said Mark Gould, chief payments executive for Federal Reserve Financial Services. “The FedNow Service is shaping how we move money, and the service will continue to be flexible to meet evolving feedback and increasing demand.”
The increased network transaction limit for customer credit transfers positions the FedNow Service to support additional high-value use cases such as:
- Corporate treasury: Instant transfers between internal business accounts can maximize investment of excess cash, free working capital and streamline reconciliation with data-rich ISO 20022 messaging
- Corporate payroll: Transferring funds between internal accounts at an organization or between an organization and its payroll processor can enable faster funding, negate the need to prefund payroll accounts and eliminate reliance on less efficient payment options, such as checks
- Vendor payments: Using instant payments to pay suppliers for inventory or services can benefit businesses by improving cash flow management, enhancing operational efficiency and optimizing liquidity management
- Real estate transactions: Immediate clearing and settlement of high-dollar commercial real estate payments, such as escrow account funding and contractor payments, can provide certainty of funds, allow after-hour and weekend payments, and improve transparency during the process
Financial institutions will continue to have flexibility to set lower transaction limits based on internal risk parameters and business needs. Recently introduced risk mitigation tools like account activity thresholds also provide participants with greater control and confidence as they expand their instant payment offerings, Federal Reserve Financial Services said.