Members come to your credit union in large part for the personalized, convenient experience that a traditional financial institution cannot provide. Digital services like automated loan decisioning have quickly become a way for your credit union to not only do that on behalf of those you serve, but to also differentiate yourself from competitors.
Now, you'll have a chance to do this yet again--with a little help from the government. Many are familiar with the concept behind the upcoming FedNow instant payment services being offered by the Federal Reserve, but when do they make their debut, and what will they mean for your credit union moving forward? The answers to those questions require you to keep a few key things in mind.
Learn What FLEX's Action Plan is for the FedNow Integration HERE
When Is FedNow Launching?
As of now, the current plan is to begin the FedNow rollout in July 2023. The Federal Reserve will launch the service in phases as more credit unions and other financial institutions join. Note that there has been a pilot program going on since 2021 and more than 120 different banks are already a part of it.
Is My Credit Union Required to Use FedNow?
No, there is absolutely no obligation for your credit union to use FedNow. Having said that, your members may dictate whether you should participate depending on if the service becomes as popular with the masses as the Federal Reserve predicts it will.
How Will FedNow Impact My Credit Union and Its Members Long Term?
The biggest way FedNow will impact both your credit unions and its members has to do with the increased speed that comes with it.
When someone transfers money from one financial institution to another, it's not like moving money from one account to the next within the same bank. Those banks need to exchange information to make sure that the logistics of the transfer are set up correctly. The process will also need to be checked for fraud. Even the settlement process can take time, which is when the money goes into the final account.
Thanks to FedNow, both clearing and settlement will occur not within days or hours, but in seconds.
From the point of view of a credit union, this makes existing members more likely to embrace digital services like FedNow because it helps create a faster and more efficient experience for them on a daily. It can also be a great onboarding tool--new members are more likely to fully switch from their existing bank once they see how easy it is to get access to all of their money.
Your credit union will also be able to verify that the appropriate funds are available before initiating one of these instant transfers. Members don't have to worry about over-drafting their accounts or paying excess fees because your credit union can conveniently stop the transfer before any of that happens.
What is FLEX's Position on FedNow?
At FLEX, we believe in the major benefits that the FedNow payment system brings with it. That's why we've recently announced our own roadmap for FedNow integration, bringing with it a wide range of different benefits for your credit union of any size across the country. To learn more about our upcoming plans, or to get additional insight into what the availability of these fast and efficient payment services will mean for you, please take a look at the blog we recently authored below.
