In starting the new real-time payments system, the Fed banks are seeking to keep pace with central banks worldwide that are pivoting to more efficient, faster payment systems. The Fed is also aiming to provide that instant payment capability more broadly to U.S. banks, beyond the reach of an existing private system.

While FedNow’s initial pricing will be similar to prices available under the rival private system, called the RTP Network, the federal government expects its pricing will change over time, though it didn’t provide any specifics on that front. “The Reserve Banks expect that the fee schedule will change as the service matures,” the Fed said in the Federal Register post.

Trying to pay for the FedNow service in a 10-year timeframe, per federal guidelines, wouldn’t make sense in terms of pricing for the new offering, the Fed said. “Application of the 10-year rolling time frame used to evaluate mature services to the FedNow Service would result in prohibitively high or unnecessarily volatile pricing, negatively affecting the Federal Reserve’s public policy objectives in providing the service,” the Fed said in the Federal Register.

The Fed board has previously said, and reiterated in the Register entry, that it will disclose FedNow costs when the service is available for participating banks.

The Fed also noted again that it doesn't expect the new system to pay for itself anytime soon. The Fed “expects the FedNow Service to achieve its first instance of long run cost recovery outside the 10-year time frame typically applied to mature services.” In addition: “New services like the FedNow Service may not initially have stable volumes, costs, and revenues.”

By Lynne Marek on Nov 7, 2022
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