FedNow Network Expands to Community Banks
The FedNow instant payment network is gaining traction with smaller U.S. financial institutions, including community banks like Bank of Belleville and CNB Bank & Trust. This expansion is democratizing access to real-time payments, increasing pressure on lagging institutions to connect as experts warn that RTP is a catalyst for new growth.
Since its launch in July 2023, the FedNow network has rapidly expanded, reaching over 1,600 participating financial institutions by early 2026. Over 95% of these are community banks and credit unions, demonstrating significant uptake among the smaller institutions the service was designed to support. This surpasses the participant count of the private-sector RTP network from The Clearing House, which has around 1,135 institutions. Transaction value on the network surged to $853.4 billion in 2025, a dramatic increase from $38.2 billion in 2024, with the average payment size quadrupling to $101,435. Despite this growth, The Clearing House's RTP network, which launched in 2017, still processes a higher total value, exceeding $1.3 trillion in 2025. A primary challenge for the network's ubiquity is that many participating institutions have only enabled "receive-only" capabilities. The complexity and cost of integrating core banking systems, ensuring 24/7 operational readiness, and managing real-time fraud prevention are significant hurdles for smaller banks to overcome before they can offer send capabilities. The growth is fueled by specific use cases beyond simple P2P transfers. Key drivers include earned wage access, digital wallet defunding, B2B payments for supplier invoices, real estate escrow disbursements, and payouts to sellers on online marketplaces. To support higher-value business transactions, the Fed recently increased the network's transaction limit. For financial institutions, enabling instant payments requires significant operational adjustments. Banks must manage liquidity around the clock, including on weekends and holidays, to ensure funds are always available for settlement. They must also upgrade fraud detection systems to validate transactions and screen for compliance in real-time, as payments are irrevocable once settled. To accelerate adoption, the Federal Reserve has offered pricing incentives, including waiving the $25 monthly service fee and offering discounts on the first 2,500 transactions per month for participating institutions. Standard fees include a 4.5-cent fee per credit transfer charged to the sender and a 1-cent fee for a request for payment (RFP). While the FedNow service is currently limited to domestic U.S. payments, its development aligns with global trends. The G20 and the Financial Stability Board are actively working on a roadmap to enhance cross-border payments by potentially interlinking domestic instant payment systems like FedNow and RTP in the future.
