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The US Federal Reserve is advancing plans to enable participants in its FedNow real-time payments system to support cross-border payment transactions, potentially extending the instant payment service beyond domestic transfers.
Launched in 2023, FedNow currently operates within a structure that limits participants from using intermediaries other than Federal Reserve Banks when transferring funds. This restriction means transactions through the service can involve only two US banks, apart from a Reserve Bank, limiting FedNow to domestic payments.
Federal Reserve advances cross-border plans
The Federal Reserve has been responding to demand from FedNow participants for greater support for cross-border instant payments.
In April, the Federal Reserve Board voted unanimously to support a proposed regulatory change that would allow FedNow participants to use intermediaries other than Reserve Banks for certain transactions.
The proposed change would provide the framework needed to connect the US domestic payment leg processed through FedNow with international payment arrangements.
Under the emerging model, the FedNow Service would handle the domestic portion of a cross-border transaction, while the international leg would continue to move through established correspondent banking arrangements.
This approach would allow FedNow to become part of cross-border payment flows without requiring the real-time payments service itself to replace the correspondent banking networks currently used for international transfers.
Banks to test enhanced FedNow messaging
As the plans progress, a group of organisations will begin testing enhanced FedNow Service message formats designed to support the sending and receiving of the US domestic leg of cross-border payments.
Following the testing phase, all FedNow participants are expected to have the opportunity to adopt the new message formats.
The enhanced messaging capability is intended to improve the way information associated with international transactions is communicated between participating institutions, while maintaining FedNow’s role in processing the US domestic component.
The development also points to a broader focus on interoperability as payment systems increasingly connect domestic instant-payment infrastructure with established international networks.
Potential use cases span payroll and corporate payments
The Federal Reserve said potential applications for the cross-border capability could include international payroll and corporate payments for global businesses.
Other possible use cases include time-sensitive international disbursements such as property transactions, insurance claims and global treasury management.
For businesses operating across jurisdictions, faster domestic settlement on the US side of an international transaction could help reduce delays associated with time-sensitive payments, while the international leg continues to rely on existing correspondent banking arrangements.
The approach also creates a pathway for financial institutions to use FedNow as part of broader cross-border payment solutions without requiring every participating institution to establish direct international payment connections.
FedNow responds to participant demand
Nick Stanescu, chief executive of the FedNow Service, said demand from participating institutions had been a key driver of the development.
“Participants have consistently told us that enabling cross-border use cases is a priority, and this milestone reflects our commitment to delivering on that feedback. It’s a meaningful step forward — and just the beginning of what’s to come.”
The planned expansion comes as central banks and financial institutions continue to develop faster payment systems and explore ways to connect domestic instant-payment infrastructure across borders.
For FedNow, the next phase will focus on testing and adoption of the enhanced messaging formats, while the international portion of transactions continues to operate through established correspondent banking channels.
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