Modern Treasury’s Take on the Future of FedNow and Real-Time Rails

FedNow® is a real-time payment service developed by the Federal Reserve, launched in July 2023, allowing 24/7 instant transactions between U.S. financial institutions. According to Modern Treasury Co-Founder and CTO, Sam Aarons, “[FedNow® is] the closest thing we’ve seen so far to have ubiquitous real-time payments in the United States…When you think about this at a macro level: faster, easier money movement means better economic connections. If we can make ubiquitous, fast payments work in the US, we open ourselves to other possibilities: fast payments across borders, the opportunity to really redefine how the world moves money.”

Business benefits

A new rail isn’t easy to implement, so what is the incentive for banks and corporates to use FedNow®? Benefits from FedNow®—and other faster payment rails like RTP®—are numerous, including improving cash flow with instant payments, enhancing customer satisfaction with immediate refunds, and streamlining financial processes to reduce costs and errors. Integrating faster payments into payment systems helps businesses capitalize on faster transactions, enhance service offerings, and gain a competitive edge.

It’s also worth noting that, in the current high interest rate environment, the ability to move money faster is particularly valuable because it reduces float time (the time that capital is tied up at any given moment). More traditional payment rails might take upwards of a few days to process and settle, meaning that funds can remain idle or inaccessible to businesses while those transactions are in process.

Additionally, faster payment options can enable faster reinvestment of funds, maximizing returns. For businesses with tight cash flows, faster payment rails offer the potential for optimized financial positions by improving liquidity, reducing costs, and enabling quicker investment in a high-interest market.

Partnering with Cross River

When operating any type of real-time payment rail, reconciliation and data ingestion in real-time is paramount. Businesses can’t wait until the end of the month to determine their cash position, when transactions are constantly entering and leaving their ecosystem, 24/7/365. In partnership, Cross River and Modern Treasury help mutual customers tackle this potential issue.

Companies can leverage Modern Treasury’s APIs and web app to programmatically initiate and reconcile FedNow® and other instant payments, ACH transactions, wire transfers, and book transfers through Cross River. Modern Treasury continuously ingests data from Cross River, allowing companies to monitor account balances, track payment statuses, and analyze platform activity directly within the Modern Treasury platform.

“The synergy between Cross River’s banking infrastructure and Modern Treasury’s payment operations platform is changing how businesses approach faster payment adoption.” said Keith Vander Leest, Head of Payments at Cross River. “It's not just about facilitating real-time transactions, it's about empowering businesses with a comprehensive toolkit to optimize cash flow and glean deeper financial insights in today's dynamic market.”

Together, Modern Treasury and Cross River make it easy for joint customers to implement, launch, and support FedNow® and other faster payment rails.

As Modern Treasury Product Manager, Ani Narayan, puts it, "We're at an inflection point in the adoption of faster payment rails in the US for B2B and B2C transactions. Cross River's deep commitment to FedNow® and other instant payment rails has allowed us to jointly help customers transform their payments infrastructure, unlock new use cases, generate new lines of revenue, and provide a better end user experience."