The new year brings with it the ever-looming inevitability of FedNow.
The new payment rail, the first U.S. update on a federal level since the 1970s, will bring real-time payments to the finance sector around the clock. Of course, fintech was already addressing this need but has been held back by the delay in the settlement between banks through legacy systems.
Introducing a real-time service into financial institutions on a national level will likely supercharge the payments industry even further.
As of its launch date (set at a vague estimate of ‘between May and July 2023’), waiting for business hours will be a thing of the past, and the heightened pace of operations that consumers are becoming accustomed to will be appeased.
“Everything we do in our lives, everything, we can do at any time of day, whenever we care to do it, except move money within a bank,” said Kevin Greene, Chairman and CEO of Tassat Group Inc. “That is about the only thing remaining that has to happen between nine to five, Monday through Friday.”
Using blockchain to power B2B real-time payments
Tassat is a fintech that addresses the need for real-time payments on a B2B level. Deploying blockchain technology, the company has set up private permissioned chains that act as real-time payment rails between financial institutions to form its Digital Interbank Network.
“Blockchain is simply a superior database,” continued Greene. “It’s fast. It’s efficient. It’s highly secure. And you can move unlimited amounts of data.”
“In the case of payments and financial services. It has many benefits. One is the speed of use. It can build a very efficient real-time payment platform. Secondly, highly secure, much more secure than legacy systems. And then thirdly, once you’re using blockchain, you can talk about or begin to build smart contracts.”
He explained that, increasingly, businesses are looking for payment options that work quickly and around the clock. TassatPay allows banks to interact with their corporate customers and bring them this service.
“Every corporate customer of every bank would like to move money faster and easier and do it around the clock. So that’s the need we were addressing with banks.”
The system’s positioning on the blockchain allows Tassat to deploy smart contracts, enhancing the efficiency of businesses in automating these real-time payments.
FedNow is likely to enhance existing solutions
The prospect of FedNow to Greene is exciting.
“We can operate the network on the blockchain around the clock. And we can net transactions amongst banks around the clock. But we can only move fiat currency again when the Fed window is open from nine to five,” he said.
“With FedNow, we will be able to net and settle around the clock.”
Although the complete list of features available with FedNow hasn’t yet been released, experts predict that real-time payments, cross-border payments, security, and payee validation will all be incorporated into the system.
Tassat has positioned itself to enhance adoption by banks.
“FedNow is just a messaging protocol,” said Greene. “And then it requires the banks to figure out how to integrate that messaging protocol with their core banking system than how to deliver it to customers.”
“Our platform, whether TassatPay or the Digital Interbank Network, is an end-to-end solution. So we can become a terrific on-ramp for any bank that would like to participate in FedNow.”
Isabelle is a journalist for Fintech Nexus News and leads the Fintech Coffee Break podcast.
Isabelle's interest in fintech comes from a yearning to understand society's rapid digitalization and its potential, a topic she has often addressed during her academic pursuits and journalistic career.