Modern Treasury Completes FedNow Service Certification
Modern Treasury has completed FedNow Service certification for real-time payments, including Credit Transfers (send/receive) and Request for Payment (RfP). Unlike ACH, FedNow enables instant, irreversible payments, with RfP offering a secure, payer-authorized way to initiate transactions.
The first time I had heard of the FedNow® Service was in a Federal Reserve newsletter in the summer of 2020. At the time, the Federal Reserve was trying to get industry experts to join various working groups to give feedback and advise on how the system could be beneficial when it launched. I eventually ended up joining the working group around Reconciliation and pushed hard for a single change that would allow receivers to more accurately reconcile incoming payments.
Although the working groups only lasted a few months, Modern Treasury has continued advocating for the FedNow Service and educating end users about its benefits. At the same time, we've been building support for the service into our Payments product. That work has culminated in our announcement this week that Modern Treasury has completed its FedNow Service Certification for Credit Transfer (Send/Receive) and Request for Payment (RfP).
FedNow is not just a faster ACH
One of the more common misconceptions I see in the market is that the FedNow Service is just a faster ACH system. Fundamentally ACH is built around the idea that funds are settled in batches and can be reversed according to the rules of the system. This has its advantages: namely that payments can be processed cheaply and in a way that is user friendly. On the other hand, FedNow payments are final, irreversible, and real-time. The benefits here are in the finality of the payment and the ability to utilize the funds right away. This is appealing to a lot of different consumer payout use-cases and interest in the system is growing.
We see this in our own data. In May, 73% of the volume flowing through Modern Treasury's PSP moved over real-time rails. Not ACH. Not wire. Real-time. That number will keep going up.
What certification actually required
Certification isn't a checkbox. We had to demonstrate production readiness across the full ISO 20022 message set for our participation types: sending, receiving, and RfP flows. It all began with the need to provision connectivity into the Federal Reserve via their FedLine Advantage® product. Because Modern Treasury’s infrastructure is entirely based in the cloud, this required the need to seek out colocation services from a data center provider and bridge the on-premises hardware with our cloud infrastructure.
After that was completed, we had to validate operational procedures, demonstrate our understanding of the FedNow Operating Circulars, and run every required test case in the testing environment. The process was rigorous as testing requires multiple rounds of messages which must be dynamically generated and well-formed.
Why Request for Payment is the underappreciated piece
In addition to being certified for Credit Transfers (Send/Receive), we also decided to become certified for Request for Payment as well. Many institutions and service providers are focused on the former but Modern Treasury strongly believes more attention should be paid to the latter.
As opposed to traditional debits, RfP invocations are presented to the payer for explicit confirmation or denial. If the payer approves, the payment executes instantly and is irrevocable, exactly the same as if the payer had sent a Credit Transfer themselves.
This enables a pull-based model with no risk for the payee that funds can be clawed back or reversed. For the payer, they have full control of the payments being taken out of their account. This means that RfP can be used for things like in-person commerce, online shopping, and account funding scenarios.
What comes next
Certification is just the beginning. We'll be sharing more about our use of the FedNow Service soon.
Beyond that, we've been doing deep work this year on what happens when instant fiat rails and stablecoin networks are treated as a unified payment layer, not two separate integrations, but one coherent execution surface. The infrastructure decisions that make that possible are not obvious, and we've been working through them.
We'll have more to say about that later this Summer.
If you're building on real-time payments and want to talk through what the FedNow Service enables for your use case, please reach out.
Get the latest articles, guides, and insights delivered to your inbox.
Authors
Sam is co-founder and CTO of Modern Treasury. Before that, was an engineer at Kiavi (fka Lending Home), was co-founder and CTO at Agustus & Ahab, and worked for Everlane and Rearden Commerce. He earned his BS from Columbia University, where he also worked on hacking projects. Sam is known to celebrate company milestones with Krispy Kreme deliveries.
