U.S. Instant Payment System Update: A Look Back at FedNow After One Year
In July 2022, the US Federal Reserve's instant payments system, FedNow, celebrated its one-year anniversary. Since then, the service has made a significant impact on the US financial landscape, enabling banks to facilitate real-time payments for customers, similar to the country's existing RTP system.
As of mid-2025, FedNow has been adopted by over 1,400 U.S. financial institutions, representing around 40% of deposit accounts in the country. However, the majority of these institutions are currently only enabled to receive payments rather than send them. Quarterly transaction volume on FedNow has grown dramatically, reaching $245 billion in Q2 2025, a 49,000% year-over-year increase, with 2.1 million payments during that quarter. Yet, this volume still represents a small fraction compared to private real-time payment (RTP) networks.
Despite the rapid adoption, technical integration, cost barriers, and network interoperability remain major hurdles preventing universal adoption. Many banks have implemented only the ability to receive FedNow instant payments, while enabling sending requires complex and costly integration with legacy payment and core systems. Infrastructure gaps and fraud concerns also slow broader adoption and use of real-time payments, restricting scale and trust across the ecosystem.
With both FedNow and private RTP networks operating, around 58% of institutions use a dual-rail strategy to cover more accounts but face increased operational complexity, higher costs, and liquidity fragmentation as they manage payments across siloed systems. Only about 2% of banks offering instant payments have fully implemented interoperability between payment schemes despite 92% considering it. Smaller banks in particular rely on service providers or correspondent banks to connect to FedNow, echoing long-standing banking models but indicating challenges in direct network access.
The payments ecosystem remains dominated by RTP in terms of transaction volume and coverage, underlining a dual-rail environment still in evolution. The Federal Reserve aims to bring FedNow to around 8,000 out of 9,200 financial institutions using its services across the country, but the path to universal adoption remains challenging.
FedNow competes for relevance with several other major legacy payment rails in the US, including RTP, ACH, cheques, and major card payment networks such as Visa and Mastercard. The report provides insights into FedNow's progress and place in the US payments landscape. The report also discusses whether FedNow is any closer to going cross-border, but more information is needed to determine its potential for international use.
The impact of FedNow on the US fintech space is significant. As a 24/7, 365 payment clearing and settlement service owned and operated by the Federal Reserve, it offers a competitive alternative to private payment networks. The service's rapid adoption, especially among smaller and mid-sized institutions seeking to compete in instant payments, highlights its potential to reshape the US financial landscape. However, the technical and operational challenges that remain must be addressed to fully realise this potential.
[1]: Source for adoption statistics and deposit account coverage [2]: Source for infrastructure gaps and fraud concerns [3]: Source for sending capabilities and cost barriers [4]: Source for transaction volume comparison with private RTP networks [5]: Source for interoperability issues and operational complexity
The rapid adoption of FedNow by over 1,400 U.S. financial institutions, as of mid-2025, is not only significant in the context of the US financial landscape but also indicates its impact on the broader business sector, particularly in terms of technology integration. However, the majority of these institutions are currently only equipped to receive payments rather than send them, highlighting the complexity and cost barriers associated with enabling sending capabilities.
The report reveals that only about 2% of banks offering instant payments have fully implemented interoperability between payment schemes, underscoring the challenges faced in bridging the infrastructure gaps and ensuring seamless operations across the payments ecosystem. This issue is particularly pertinent for smaller banks, which rely on service providers or correspondent banks to connect to FedNow, echoing long-standing banking models but indicating ongoing challenges in direct network access.
