Fundamentals of Faster Payments

These networks act as connectors between card schemes and payment networks allowing for transactions between cardholders, businesses, and governments.

Financial institutions that issue debit cards to customers.

The process of transferring money from one party to another using a debit card.

Mastercard's service for sending money directly to debit cards.

Visa's service for sending money directly to debit cards.

Pre-funding ensures funds are available immediately by posting agreements between participating FIs.

Mastercard manages transactions through internal ledgers and batch netting, ensuring a smooth flow of funds.

Visa settles transactions once daily, transferring funds from sender to receiver FIs at the end of the business day.

Transferring money between accounts within the same financial institution.

Transferring money between accounts across different financial institutions.

Transactions that involve individuals sending money to individuals.

Businesses using faster payments to optimize cash flow and manage their finances.

Consumers using faster payments for paying bills, buying products, or making quick transactions.

Funds are immediately available in the recipient's account upon completion of the transaction.

Payments sent between the payer and the payee.

Faster Payments that allow individuals to transfer funds quickly between accounts at different institutions.

Small ACH credits (less than $1) used to verify account access, typically accompanied by offsetting debits.

Messages used for funds transfers within the ACH network, resulting in accounting entries.

Messages that don't change account balances but provide information or status updates about transactions, reports, or requests.

Codes used in ACH payments to classify message types, encompassing both value and non-value messages.

A type of ACH payment message used to send funds from one account to another.

An ACH payment message used to transfer funds between financial institutions, specifically their Master Accounts or Correspondent accounts.

An ACH message sent to return funds previously received.

Messages that indicate an error or rejection of a payment request due to failing validation.

Same Day ACH payments settle within the same business day. This expedites the payment cycle, but funds availability might take up to three hours.

The process of transferring funds to settle payment obligations between banks. It includes clearing transactions and finalizing the transfer of funds.

FedNow, a real-time payment system, settles transactions immediately using Federal Reserve accounts. It provides immediate fund availability, ensuring a seamless real-time payment experience.

TCH RTP uses a shadow account held at the Federal Reserve in New York for settlement. The system ensures real-time settlement, offering swift and instantaneous transactions.

Same Day ACH uses three settlement windows throughout the day to balance participant positions net. This allows for efficient batch processing of payments within the same day.

A network that enables real-time payments between bank accounts. It's often used for payroll, bill payments, peer-to-peer transfers, and other financial transactions.

The RTP network allows payments up to $1,000,000 and provides instant settlement and posting, making the transactions irrevocable.

A service offered by the Federal Reserve for real-time payments between financial institutions 24/7/365.

Only financial institutions eligible for a Federal Reserve Master Account can directly access FedNow. However, smaller institutions can access the service via third-party providers (TPSPs).

Unlike the RTP network, FedNow transactions involve the movement of funds between central bank-held accounts, adding a level of security and speed.

FedNow transactions are settled and posted instantly, making them irrevocable. They are limited to $500,000 per transaction, though the default limit for banks is $100,000.

Both RTP and FedNow utilize the ISO 20022 standard, supporting richer data exchange with payment messages, which allows for more detailed information related to transactions.

FedNow offers additional features beyond payment messages, including request-for-return, request-for-payment status, account balance requests, and account activity reports.

A financial institution that relies on another FI (correspondent FI) to maintain a master account with the Federal Reserve and process transactions on their behalf. They may also use correspondents for managing liquidity.

A financial institution that opens a master account with the Federal Reserve on behalf of another FI (respondent FI), handling transactions and settlements for them. They act as full participants in the FedNow system.

Third-party entities that connect financial institutions to the FedNow network. They process transactions, manage communication, provide compliance tools, and handle fraud management.

The Federal Reserve acts as the developer, operator, and settlement system for FedNow. It oversees the network, ensures regulatory compliance, and manages systemic risks within the payment system.

The FedNow network uses FedLine Advantage, a secure electronic platform that allows participants to access payment services, account information, and communication.

These entities possess an "Authorized Connection Profile" with the Federal Reserve, allowing them to process and manage messages and payments on behalf of other participants.

Service providers within the FedNow ecosystem that connect FIs to the network, process transactions, and provide compliance and fraud management tools.