What is a FedNow API?

The API allows software applications used by fintech companies, banks, and other businesses to integrate with FedNow’s platform. The API sets rules and protocols that allow different pieces of software to exchange information between themselves, working like a kind of bridge for communication.

The FedNow API connects financial institutions directly to the Federal Reserve to clear and settle transactions within seconds rather than in one to three business days (like with Automated Clearing House payments).

While businesses already offer some instant payment options to customers, such as Venmo or PayPal, banks and payment processors can use the FedNow API to give their customers the option of immediately initiating transactions and identifying any issues with payments at that time. Beneficially, this API supports multiple use cases, including P2P transfers, bill payments, and payroll.

Modern Treasury facilitates bank integration and allows you to interface with the FedNow payment rail programmatically in a fraction of the time it would take to interface with the FedNow API independently.

How Does the FedNow API Work?

Modern Treasury’s API connects over 10,000 financial institutions to the FedNow Service. Through the API, users can initiate real-time transactions, receive immediate alerts about payment statuses, and begin payment requests directly from customers to provide instant payments and better customer experiences.

The service is characterized by key functionalities such as:

1. Initiating Payments: Sending requests to transfer funds instantly between accounts.
2. Payment Status Checks: Tracking the progress and confirmation of a payment.
3. Account Validation: Verifying the recipient's account details before starting a transfer.
4. Reporting and Reconciliation: Accessing transaction histories, logs, and reports.
5. Request for Payment (RfP): Facilitating payment requests made between one party and another.

The API is part of a closed-loop system, which means transactions are only processed through partner banks to keep them secure.

How Do I Choose the Best FedNow API?

The good news is that the Modern Treasury API connects businesses not only with the FedNow Service but also with RTP and other integrations. The platform helps connect to FedNow, which services all Federal Reserve banks (over 10,000 financial institutions).

There are also specific use cases for the API that should be considered prior to set-up:

• Business-to-Business Payments: Requests for Payment (RfP) and e-invoices can be sent directly to the customer, and the customer can pay directly from a banking app.
• Business-to-Consumer Payments: Instant payments, including instant payroll payments, could be initiated on the same day. For example, workers could be paid at the end of each shift.

With this integration through Modern Treasury’s platform, businesses are able to move, track, and reconcile payments in real-time.

Is There a Limit to FedNow Transactions?

The FedNow Service operates 24 hours a day, seven days a week, 365 days a year. There is no limit on the number of transactions you can initiate, but a credit transfer transaction value limit is set at $500,000. Businesses start with a default limit of $100,000, and you can ask to adjust up or down to suit your clients’ needs. Modern Treasury has no specified limit through our prebuilt API.

Which Banks Offer FedNow API Transactions?

If your business has a Master Account with the Federal Reserve, then your bank, company, or fintech organization may be able to integrate with and offer the FedNow Service. The Modern Treasury API connects you to FedNow with a pre-built API for easier integration. Using it on the Modern Treasury platform, users can also integrate to other payment rails from one dashboard, including ACH, FedNow, RTP, and Wire.

How is the Developer Experience?

There are multiple ways for businesses to connect to FedNow. The first option, which takes months and significant support, is directly through the Federal Reserve. The Federal Reserve has included a resource to help developers with FedNow API integration. The service, FedNow DevRel, provides support for service implementation, including technical guides and operating procedure manuals.

A better option is the Modern Treasury API with integration support, which provides for a better developer experience without the hassle of building a customized integration. Since this prebuilt API saves teams the cost of building and customizing a custom bank integration, businesses are able to connect sooner and have complete control over their workflows.

Setting up your payment product is faster and simpler when you own your banking relationship — Modern Treasury offers the financial infrastructure to eliminate middlemen in banking processes. With this operating system and its API, you can move, track, and reconcile payments in real-time and configure UIs and APIs to fulfill your needs to make or receive payments at scale.

How Does FedNow Help Finance Teams?

FedNow helps finance teams with business-to-business and business-to-consumer transactions, letting your bank, fintech company, or organization make Requests for Payments (RFP) and e-invoices, initiate instant payments, and more. You can also use Modern Treasury’s FedNow API integration to improve access to funds when clients or employees need them quickly, initiating transactions and transferring funds faster than the ACH’s minimum one-to-three-day wait period.