AWS Powers FedNow’s Push for Instant Trust

Watch more: Live Roundtable: AWS and FedNow, Nilesh Dusane and Dan Anthony

Instant payments are reshaping how money moves and how financial institutions (FIs) meet customer expectations.

For example, the Federal Reserve’s FedNow® Service,  launched in 2023, has continued to build momentum. Banks are modernizing their systems to take advantage of always-on, cloud-enabled payment rails.

Dan Anthony, executive vice president and chief information officer of FedNow, and Nilesh Dusane, global head of institutional payments at Amazon Web Services (AWS), discussed with PYMNTS how banks are seizing opportunities in instant payments, the role of the cloud in enabling innovation and why customer trust depends on building resilient and personalized systems.

Adoption of the FedNow Service is best measured by reach and volume, Anthony said.

“We’ve increased to more than 1,400 participants on the network, from 35 at launch,” he said. “Our volume of transactions and our value of transactions are increasing by double- and triple-digit year on year. We’re north of 10x transaction volume increase year on year.”

That growth has already been put to the test in real-world emergencies.

“One of the biggest milestones, I think, that makes me realize the impact of instant payments … was emergency relief, disaster relief payments, being able to come over, and we’ve processed the first FEMA payments over FedNow,” he said. “That’s just tremendously exciting to me, and a mark that we’ve really arrived.”

The pandemic set the stage for the FedNow Service’s cloud-first design.

“One of the key decisions was launching in the cloud,” Anthony said. “We’re cloud native, and that really affords us the ability to move fast and to innovate.”

During the pandemic, provisioning physical infrastructure would have been, in Anthony’s words, “a nightmare.” Instead, the cloud enabled scalability, resilience and rapid onboarding.

“Our fastest time of onboarding from digital [ink], virtual [paper] is seven days to go live,” he said. “That’s just stunning in the world of financial services.”

Dusane said he sees the FedNow Service as a catalyst for across AWS FI customers.

“What we are seeing right now is by taking instant payments … banks have started to modernize their payment stack using cloud-native services on AWS. And that enables financial institutions to do all the things that Dan is talking about, which is faster time to market, building hyper-personalized services for [both retail and commercial customers and more],” he said.

This shift allows banks to move from “lift and shift” migration to true cloud-native design, he said.

“That enables our financial customers [to] go live with these solutions as quickly as possible [and] increase usage, which accelerates time to value,” Dusane said.

Cloud-native microservices also allow banks to offer dynamic payment routing.

“They give the option to the customers to route payments through different payment rails,” Dusane said.

For example, a payroll missed on ACH can be routed instantly through FedNow.

He pointed to one AWS customer developing “just-in-time expense reimbursement” for businesses.

“As soon as the expense report is approved, boom, the financial institution is offering that as a service to their corporate customers,” Dusane said.

Anthony praised the example as exactly the kind of innovation FedNow was built to enable.

“That’s exactly the kind of use case for FedNow I’d love to see more of,” he said.

FedNow has responded to banks’ requests for higher transaction ceilings.

“We launched with $500,000; we went to $1 million earlier this year and almost immediately saw maximum value transactions flowing through,” Anthony said. “There’s a lot of appetite for $10 million transactions.”

Alongside higher limits, the Federal Reserve has added risk management services, automation tools and account activity thresholds.

Anthony also highlighted the potential of requests for payment (RFPs) in B2B settings.

“That has tremendous potential … where you can start to orchestrate business processes, including invoicing and receipt of payment in a fully automated way with real-time payments coming through,” he said.

Instant rails alone are not enough, Dusane said.

“FedNow can do instant payments, but if the processes before that are batch, then you are not giving their end customers the full benefit,” he said.

Banks need 24/7 ledger availability, near-instant risk and fraud checks, and embedded know your customer (KYC) processes to support true instant fund flows.

Building new embedded experiences requires experimentation.

“Technology is the easy part … but how do you use FedNow in the context of a business value that you can deliver to the end customer?” Dusane said. “That is an experiment.”

Cloud-first delivery lets  FedNow bake resilience, safety and security into the product from the ground up, Anthony said. For banks, these investments in resilience are directly tied to customer trust.

As Dusane put it: “Personalization is extremely useful and important, and the technologies plus the things that are happening across the industry from a data standpoint are helping all of us build those personalized experiences for their end consumers at scale.”

Looking ahead, both executives underscored the value of richer data.

“The ISO 20022 spec is very data rich,” Anthony said. “There are a couple of thousand fields available for use.”

Businesses will integrate that data into supply chains, and financial institutions will use it to create value-added services, he predicted.

Dusane agreed, pointing to reconciliation, forecasting and fraud detection.

“With instant payments and services like cloud … the entire financial services industry …will get access to richer structured data when it comes to payments, and that will enable innovation,” he said.

Anthony summarized the vision.

“Financial institutions come on to FedNow to bring the value of instant payments to their customers,” he said. “That value is really maximized when they can not only receive, but also send instant payments. That’s when they can manage their own bank accounts and their own finances with full flexibility, and to paraphrase, move money at the speed of need.”

The post AWS Powers FedNow’s Push for Instant Trust appeared first on PYMNTS.com.