Finopotamus has assembled a panel of experts in a recurring series, The Industry Leaders Forum (ILF). Each month, we ask the panel a broad technology question and share their informative responses.
James Moughon, VP of Delivery, Praxent
The launch of FedNow has many considering the potential benefits, but there are also many questions around the processes and technology required to successfully implement it, as well as how it fits into a credit union’s strategy.
FedNow and the heightened attention on faster payments have the potential to be especially impactful when it comes to small business banking. As the fight for deposits continues, many institutions have turned their attention to small businesses, determining how to acquire these relationships and better serve this segment. Payments play a big role here, since one of small businesses’ most prevalent pain points is optimizing how to pay and get paid.
However, FedNow will not be for every institution. First, they should consider if the use cases are there – does the institution have the business customers or members for this investment to make sense? The technology side must also be considered. Does the institution have the expertise and resources to integrate into the rails and conduct the data mapping? While there are several vendors offering off-the-shelf solutions, there is still a lift required by the institution. Then, there’s the deployment of capital – does the institution have enough to instantly move money? And this isn’t just something for technical staff to manage, there must be compliance buy in as well. Perhaps the largest consideration is the operational concern of implementing FedNow. After all, real-time payments mean real-time fraud. There will be many steps a credit union has to take to stay on top of increased risk.
While FedNow has the potential to deliver significant value to credit unions and their business members, it should be approached carefully and strategically. The institutions that do decide to embrace FedNow should consider tapping strategic implementation partners to help them effectively integrate into the rails while optimizing compliance.