FedNow tries to take its domestic success global

• Key insights: FedNow is considering a change to its rules that would allow member banks to access real-time payments for cross-border transactions. 
• What's at stake: Most real-time rails focus on domestic payments, though there has been some movement by networks such as RTP to add international options. 
• Forward look: The Fed will accept public comment until early June, and its decision will not not require congressional approval.

One of the criticisms of real-time transactions is that they're too inward looking, and don't work well with payment systems outside of their home markets. 

Fresh off of a huge boost in domestic volume, the Federal Reserve is considering a tweak that would allow FedNow, the government's instant-settlement option, to support cross-border transactions. The Fed's proposal would amend its regulations to enable the use of intermediaries that are not Federal Reserve banks, which would facilitate cross-border transactions. The proposed changes are similar to rules governing the Fedwire Funds Service, which has allowed intermediaries for decades, according to the Fed.  

"FedNow would still settle only the domestic leg between eligible U.S. participants," Stuart Cook, a fintech industry investor and advisor, told American Banker. "The cross border component would be handled through a separate leg by the intermediary, before or after the FedNow transfer."

The Fed is seeking public input on the proposed amendments. Comments are due within 60 days after publication in the Federal Register, which would be June 7.

FedNow, which launched in 2023, has about 1,700 member banks and grew particularly fast in 2025, processing more than $850 billion, up more than 2,100%, driven partly by an increase in transaction limits. The rail enables settlement for payments between member banks in a few seconds. The Fed did not comment for this story and it's unclear how FedNow fees would change for cross-border transactions. Under the proposal, the rules for FedNow won't dramatically change, but will slightly expand to enable a middle party to support transactions that involve a non-U.S. party.

This will likely be correspondent banks, which provide services where a primary bank in a transaction does not have a presence. Swift, the international messaging service, has about 11,000 correspondent banks on its network, providing a ready-made network of banks for real-time transfers. Swift has also upgraded its technology in recent years to accommodate the growth in cross-border e-commerce; and has pushed the ISO 20022 standard, which includes more information in payment messages to support real-time settlement. 

"By using FedNow for the domestic settlement leg, the U.S. portion of the transaction becomes instant," Erika Baumann, managing director of banking and payments for Datos Insights, told American Banker, noting the rest of the model – using the correspondent-banking network – stays the same. "This is an improvement, but not real-time cross-border settlement. For sure more work to be done, but every step helps." 

The use of correspondent banking in general has declined by about 50% in the past 10 years, according to Celent. Part of the challenge is the expense, borne partly out of the cost of anti-money-laundering regulations. "Cross-border payments are slow and expensive because they depend on correspondent banking chains where each intermediary runs its own compliance checks, holds its own liquidity, and adds its own fees," Cook said. All of that could add up to between 2.5% and 5% to the transaction value, according to Rodman Reef, managing principal at Reef Karson Consulting.

What the FedNow proposal does accomplish, according to Cook, is add speed to the domestic leg. If a person is sending money from Germany to the U.S., the receiving U.S. bank could credit the beneficiary's account in seconds via FedNow, rather than waiting for a batch settlement or a slower internal process. 

"That's definitely an improvement," Cook said. "But it doesn't fix the correspondent banking chain itself. The international leg still runs through the same intermediaries, the same compliance processes, the same liquidity requirements. It makes the last mile faster without redesigning the road."