FedNow to support cross-border instant payments

Federal Reserve Financial Services revealed on Wednesday that the FedNow Service is expected to support cross-border transactions shortly, according to PYMNTS.

The system launched in July 2023 and has previously processed only domestic payments. Under the new design, FedNow will handle the U.S. portion of each transaction. The overseas leg will move through correspondent banks, which transfer funds between countries on behalf of other banks.

A group of early adopters will test new message formats built for these payments. The Federal Reserve did not identify the participating institutions. It stated that the formats will eventually be available for adoption by every FedNow participant. Applications span from global treasury management to insurance claims, corporate payments, and international payroll.

“Cross-border transaction capabilities will give financial institutions powerful new ways to serve internationally active customers,” said Nick Stanescu, chief FedNow executive. “Participants have consistently told us that enabling cross-border use cases is a priority, and this milestone reflects our commitment to delivering on that feedback.”

No timeline has been established for a broad rollout. In April, the board of the Federal Reserve proposed amending Regulation J to permit banks to utilize non-Federal Reserve intermediaries for sending FedNow payments. This proposal remains pending.

Stanescu described the announcement as “just the beginning of what’s to come.”