Future of FedNow and Triple Clock Theory Implications


In four days, the Federal Reserve will start its quick account-to-account payments train. The Clearing House, which operated the first real-time railroad to begin operational in 2017, will now operate two real-time railroads in the United States with the launch of FedNow on July 20.

According to the flood of press releases and PR pitches we’ve been receiving over the past few weeks, the launch of FedNow is to payments what the Red Sox winning the World Series in 2004 after an 86-year drought was to baseball: a historic achievement that was long overdue.

The United States formally begins the countdown to the broad adoption of instantaneous account-to-account payments on July 20. TCH with RTP® has reached notable milestones of its own six years after being online, with 274 financial institutions and 65% of U.S. deposits connected to its rail. Even TCH and its member institutions would admit that there haven’t been many transactions and that momentum around use cases has been sporadic.

TCH with RTP® has not yet attained the critical mass needed to ignite its payment platform. With the introduction of FedNow, competition for RTP® traffic and perhaps for the infrastructure enabling real-time payments for new use cases, such merchant payments, will increase.

FedNow claims that 56 other “Early Adopters” are qualified and prepared to transfer funds over its rails upon launch, in addition to the US Treasury. 

Even though four TCH founding members, J.P. Morgan, Wells Fargo, US Bank, and BNY Mellon, are also prepared to launch on Thursday, the profile of those early adopters leans heavily toward small FIs — 41 of the 56 are FIs, many of which have profiles like 1st National Bank of Yuma, Buffalo Federal Bank, and Consumers Cooperative Credit Union with assets of $550M, $174M, and $2.8B respectively. 

Adyen, Fiserv, FIS, Jack Henry, Finastra, and ACI are just a few of the fifteen technology companies that banks and FinTechs may employ to connect to the FedNow rails.