FedNow Payment System Quiz

The speed at which a payment instruction is transmitted to the receiving bank.

The time it takes for the funds to be transferred from the sender's bank to the receiver's bank.

The point in time when the payment becomes irrevocable and cannot be cancelled.

A real-time payment system operated by the Federal Reserve that enables immediate and continuous funds transfers.

A real-time payment system that allows for immediate and continuous transfers of funds.

A batch payment system that allows for same-day payments, but with specific deadlines for processing.

The ability of different payment systems to communicate and exchange information seamlessly.

When payment systems cannot communicate and exchange information with each other.

Verifying a user's identity to ensure they are who they claim to be. It's like showing ID to prove you're old enough.

Giving permission for a transaction to take place. It's like signing on the dotted line.

A participant in the FedNow network that has a designated account for settling payment transactions. This can be a financial institution or a service provider.

Using multiple methods to confirm a user's identity. Example: Password and a one-time code sent to your phone.

Entities that act on behalf of a FedNow Participant, handling payment messages and managing connections. They can be financial institutions or specialized service providers.

A service that confirms a user's address to prevent fraud. It's like verifying your home address to make sure you're who you say you are.

A key feature of FedNow that allows financial institutions to receive payment messages without immediately posting them to the recipient's account, providing flexibility and control.

A method where FedNow participants can request information about a payment or initiate a return of funds. This helps to manage potential issues and discrepancies.

A service that confirms a user's identity to prevent fraud and ensure they are the rightful owner of the account.

The rules and regulations governing a specific transaction or system, such as debit transactions.

The secure communication platform provided by the Federal Reserve that enables financial institutions to access FedNow and other payment services.

A set of legal agreements outlining the conditions for using a service, like those for Visa Direct.

This allows for transfers between individuals and businesses, making it easier to send and receive money quickly and securely.

This refers to the different potential use cases for FedNow, including business-to-business, business-to-consumer, consumer-to-business, and government payments.

Implied authorization occurs when a user is authenticated successfully, thus granting an implicit right to proceed with the transaction.

Faster payments require more automated processes like sanctions screening, fraud checks, and authentication.

The ability of different payment systems to seamlessly communicate and exchange information.

A bilateral agreement where one FI (correspondent) provides settlement services to another FI (respondent) for access to payment infrastructure.

Correspondent banks provide a new revenue stream by charging fees to respondent banks for settlement services.

The 24/7/365 availability of faster payments calls for backup plans to ensure uninterrupted service.

Funds available for financial institutions during the business day for making payments.

Faster payments increase uncertainty in liquidity forecasting, making it challenging for financial institutions to predict and manage cash flows.

Faster payments enable financial institutions to free up liquidity for other purposes by relying on correspondent banks for settlement services.

Financial institutions who participate directly in the FedNow system, having their own account for settling transactions.

Financial institutions who rely on service providers to connect to the FedNow network.

Entities that facilitate FedNow transactions for financial institutions, like managing connections and payment messages.

The comprehensive set of rules and guidelines governing the FedNow system, including security protocols and operational procedures.

The ability of FedNow participants to send and receive payments 24 hours a day, 7 days a week, 365 days a year.

The requirement for FedNow participants to handle different message types, such as payment instructions and confirmations.

The ability of different payment systems to communicate and exchange information seamlessly, enabling smoother and more efficient transactions.

Maintaining a list of suspicious entities and rejecting transactions involving them, based on their routing or account numbers.

Faster Payments systems allow individuals and businesses to track funds more accurately and make informed cash flow decisions due to the reduced time between payment submission and posting.

Faster Payments enable consumers and businesses to make last-minute or emergency payments, reducing late fees, account overdrafts, and supplier issues.

Faster Payments reduce reliance on short-term financing like payday loans for both consumers and businesses, leading to financial stability and savings.

Businesses benefit from receiving payments more quickly, improving cash flow, and reducing the need for additional loans, ultimately leading to increased working capital.

Straight-through processing, aided by value-added services (VAS) like request-for-payment, reduces physical documentation and manual involvement, lowering operational costs.

Financial institutions need to adapt their liquidity management processes to handle the unpredictable nature of real-time payments and the increased volume of transactions.

Transitioning to instant payments requires data for forecasting liquidity needs, which can be difficult for financial institutions, especially for high-value business-to-business payments.

Push-to-card payments, a type of faster payment, are pre-funded and settled in commercial funds, requiring a separate pool of liquidity for financial institutions to manage.