Q&A with Ken Montgomery, FedNow Program Executive


Ken Montgomery is Program Executive for the FedNow® Service, a brand-new day-and-night immediate payments service that the Federal Reserve released in July. The intro of the FedNow Service is the conclusion of a collective effort the Federal Reserve carried out with the payments market to assist make daily payments quickly and hassle-free for American services and families. From his capability as very first vice president and chief running officer of the Federal Reserve Bank of Boston, Montgomery was the very first worker called to the FedNow Service group, which he has actually led because 2019. He used some reflections on the amazing journey to introduce the service, and what lies ahead for development in immediate payments.

Following strenuous preparation and advancement, the FedNow Service is live. Taking an action back, why did the Federal Reserve make the dedication to advancing immediate payments in the United States?

There’s no concern about the growing requirement for speed and benefit beyond standard payment services in our ‘always-on’ world. That suggests providing faster payments every day of the year, all the time, and with finality of payment and instant access to funds.

The Fed addressed the payments market’s requirement to satisfy the growing need from monetary services clients, who progressively anticipate to send out and get cash within seconds. The launch of the FedNow Service brings the U.S. payment market in line with other nations that provide the reach and advantages of immediate payments. We released in July, and we currently see clients opening the capacity of immediate payments through the service.

The monetary services market, and the economic sector more broadly, asked the Federal Reserve to establish an immediate payments system that would satisfy growing consumer expectations. When we started this task, we got input and got numerous letters from banks and other interested celebrations — consisting of services, scientists, and policymakers — prompting the Federal Reserve to establish an immediate payments system that would provide reasonable and equivalent access to all banks. Then in 2019, we made the dedication to construct and introduce the FedNow Service within 4 years, and we have actually provided on that dedication.

The service released with 35 taking part banks and the U.S. Department of the Treasury. What are your expectations for how the network will grow in the future?

We have actually seen robust interest from the market for the FedNow Service and anticipate the network to grow gradually in time. We have actually currently invited an accomplice of brand-new individuals to the network because launch, and we have practically 200 signed arrangements with companies that mean to embrace the service, with more being available in every day.

Financial organizations comprehend that immediate payments are an essential method to assist customers and services handle capital, pay quickly to prevent late costs or service cancellations, or make money right after a work shift. Those are just a few examples, however there will no doubt be many others that customers and services welcome and require. Over time, we anticipate customers to be able to utilize mobile apps or sites of taking part banks to send out and get immediate payments rapidly and firmly. There are more than 9,000 banks in the U.S. and we motivate each of them to sign up with the FedNow Service.

Organizations still considering their journey to immediate payments will likewise discover it handy to understand that we have actually digitized and structured our onboarding procedure. I like to believe we didn’t simply provide a contemporary payment rail — we likewise provided a contemporary onboarding procedure. The feedback and outcomes have actually both been favorable, consisting of companies informing us the procedure is smooth and simple. In one current example, a company had the ability to sign a digital agreement and end up being licensed on the FedNow Service within 2 weeks of starting their onboarding procedure.

In your experience as a leader of the FedNow Program, what was the assisting structure you followed, and which outcomes are you most happy with? 

Our assisting structure was to provide the FedNow Service in the timeframe we devoted to, which was 2023-2024. We likewise devoted to utilizing innovation-friendly innovation that satisfies our goals for schedule and security functions and functions — and we are happy to have actually provided on that dedication also.

Our innovation technique for the FedNow Service is driven by security, efficiency and durability — 3 pillars that are at the center of every innovation choice we make. To assist us accomplish those goals, the FedNow Service utilizes dispersed innovation, artificial intelligence, and cloud-first style. The usage of cloud innovation for the FedNow Service provides the functional resiliency required for a high-volume service that runs continually, placing us to support extra performance as the size and reach of the FedNow Service broadens in time.

We think these functions will be vital for remaining responsive to the requirements of the market. Staying responsive methods providing FedNow Service includes with speed and dexterity, so that we assist market development thrive in the near term and far into the future. That suggests driving usage cases that put immediate payments in the hands of more people and services.

We have actually done all of this in close cooperation with the market, taking in feedback from individuals, keeping them upgraded on our development, and assisting with preparation and education. We are grateful that many vital locations of work came together to form the structure of the FedNow Service. None of this would have been possible without the efforts of companies throughout the market, consisting of workgroup members, pilot individuals and early adopters — and we are grateful to all of them.

As you simply explained, technology development is a trademark of the FedNow Service. How will the FedNow Service’s facilities enable the service to carry out and progress in time? 

When we developed the FedNow Service, we heard in clear terms from the market that it required to be a platform for development, both now and years into the future. The FedNow Service has the technological foundation to do simply that.

We developed the system to provide a great deal of versatility. For example, the FedNow Service’s innovation enables us to introduce brand-new functions quicker due to more regular, smaller sized, and nondisruptive innovation updates, assisting in a 24x7x365 operation. Our technique to innovation likewise leverages automation, combination and screening throughout the advancement cycle, not exclusively in the last screening stage.

The service provides different involvement types, structured liquidity management by means of the Federal Reserve master account, and without prefunding needed. We provide alternatives to banks, consisting of the options of whether to embrace a brand-new function beyond the core item. These elements of the FedNow Service will feel natural and familiar to practically every organization currently taking part in FedACH® or Fedwire® Funds services.

Looking forward, we expect regular releases and nimble responsiveness to the requirements of the market. The platform is flexible and neutral and supplies chances for banks to deal with company and fintechs to establish not just other usage cases, however likewise add-on abilities.

How will the Federal Reserve make sure continuous and significant engagement throughout the market? What will it require to keep everybody engaged?

Outreach and cooperation have actually been vital because the beginning of the FedNow program, and they will be no less vital moving on. Dialogue and outreach are the very first and finest methods to remain familiar with the prospective advantages of immediate payments — for senders and receivers alike.

We are really familiar with the network result, consisting of the requirement to effectively onboard brand-new individuals. We will continue to engage with the market throughout a variety of online forums, consisting of the FedNow Community, workshops and advisory groups. In addition, the Ecosystem Accelerator Group, which is a network of third-party companies beyond the banks area, enables us to engage with and comprehend how ingenious gamers in the community are establishing immediate payment options to resolve service requirements.

Organizations that are still being familiar with faster payments can likewise benefit from the comprehensive instructional resources readily available on the FedNow Explorer website. Most significantly, I prompt companies to speak to their Federal Reserve Relationship Manager – as a pointer, every banks in the U.S. has a Relationship Manager designated to them. These groups stand all set to assist you take a FedNow Readiness Assessment and take advantage of development in immediate payments.

In the wake of the launch, exist any particular usage cases you are finding out about that might speak with the worth of immediate payments?

We are currently familiar with a growing variety of ingenious usage cases, and we likewise anticipate to see some usage cases we have actually not yet pictured.

Consumer-to-business is a location where we currently see strong interest and uptake. In our newest research study, almost all customers revealed interest in quicker payments as a method to manage last-minute bill-pay for things like energy costs and home mortgage payments. So it was not a surprise to see expense payments in the really first wave of deals.

Going the other method — business-to-consumer — we see strong interest in made wage gain access to, which suggests payroll for employees at the end of their shifts. Gig employees likewise stand to get clear gain from accessing pay upon rendering services.

Business-to-business payments are a location where we anticipate fast adoption since of the scaled advantages of faster payments. According to our research study, one out of every 2 services have actually currently determined manner ins which quicker payments can conserve them cash. One essential example is demands for payments — messages that services send out to customers to perfectly assist in immediate payment for items and services — which are currently happening on the FedNow Service.

And last but not least, I’d highlight immediate payments as a chance for federal government entities at all levels to enhance the methods they serve constituents. It is pleasing to have the U.S. Treasury as a FedNow early adopter, and we are seeing strong interest amongst state and city governments also.

Any suggestions for lenders still uncertain about taking actions to embrace immediate payments?

We all understand that increasingly more customers and services are anticipating a real-time, always-on experience in practically whatever they do — consisting of when it concerns payments. From research study we perform at the Federal Reserve, we likewise understand that more than 80% of customers and services anticipate their banks to provide immediate payments. There is no doubt that banks and their clients are approaching a 24×7 truth.

We have actually striven to make the FedNow Service available to all banks, no matter their experience and proficiency in immediate payments. Some companies might still require to discover the finer points of how immediate payments work and – more significantly – how their clients can take advantage of faster payments. Other banks might require aid assessing company or choosing how to get involved – for instance, whether to provide demand for payments.

Wherever a company is on its journey to quicker payments, I guarantee you the Federal Reserve group stands all set to supply assistance and assistance. We see an intense future in immediate payment development — and we wish to assist every banks belong to it.


A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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