How U.S. Payments Really Work Part 14
‹‹ How U.S. Payments Really Work ››
How U.S. Payments Really Work Part 14
‹‹ Series Overview ››

FedNow: Built by the Fed. Moving Like the Fed

The Federal Reserve’s real-time payment rail—government infrastructure meets developer integration challenges.

Suma Manjunath
Author: Suma Manjunath
Published on: September 10, 2025

FedNow Series Banner

Audience: Backend engineers, fintech architects, payments developers
Reading time: 12 minutes
Prerequisites: Familiarity with ACH, ISO 20022, and real-time payments integration
Why now: FedNow adoption lags behind RTP, yet regulators and community banks are pushing for universal real-time payments. Developers will increasingly be tasked with integrating both.

TL;DR:

⚠️ Disclaimer: All scenarios, accounts, names, and data used in examples are not real. They are realistic scenarios provided only for educational and illustrative purposes.

Problem Definition

The challenge: Developers must integrate FedNow into financial institutions already dealing with RTP—or neither—while navigating real-world fee structures, operational considerations, and evolving messaging standards.

Who faces this: Fintech engineers, bank developers, platform architects connecting legacy cores to modern payment rails.

Cost of inaction: Smaller banks get excluded, developers duplicate integration across non-interoperable rails, and merchants face fragmented payment acceptance.

Why current solutions fail: RTP offers speed; FedNow offers access—but costs and interoperability gaps remain unresolved.

Solution Implementation

Architecture Overview

FedNow integration requires three layers:

flowchart TD
    A["Originator (Consumer/Merchant)"] --> B["Originating Financial Institution (Bank/Credit Union)"]
    B --> C["FedNow Service (Federal Reserve)"]
    C --> D["Receiving Financial Institution"]
    D --> E["Beneficiary (Consumer/Merchant)"]

    B --> F["Participant Service Provider (PSP: FIS, Fiserv, Jack Henry)"]
    F --> C

Step-by-Step: FedNow API Integration

Example: Credit Push Payment via FedNow

import requests
import datetime

# NOTE: This endpoint is fictional for demonstration—
# replace with actual Fed sandbox URL from Fed docs.
API_URL = "https://sandbox.fednow.gov/api/v1/payments"

payment_request = {
    "transaction_id": "TXN202509030001",
    "routing_number": "061000052",
    "account_number": "123456789",
    "amount_cents": 12500,
    "transaction_code": "22",
    "individual_name": "JANE DOE",
    "individual_id": "PAY20250903",
    "request_date": datetime.date.today().strftime("%Y%m%d")
}

try:
    response = requests.post(API_URL, json=payment_request, timeout=10)
    response.raise_for_status()
    result = response.json()
    print(f"✅ FedNow Payment Success, Trace: {result['trace_number']}")
except requests.exceptions.RequestException as e:
    print(f"❌ FedNow Payment Failed: {str(e)}")

💡 Tip: Always clarify that sample endpoints are placeholders—always consult Fed’s documentation for real sandbox URLs.

Pricing Reality Check

Adoption Metrics (2024)

Messaging Modernization Context

FedNow and RTP both use ISO 20022. Meanwhile, Fedwire migrated to ISO 20022 on July 14, 2025. This adds another layer of modernization across U.S. payment rails.

Integration Challenges Revisited

❗ Warning: Misunderstanding fee structures can lead to unexpected costs, especially during initial rollout beyond the waived 2025 window.

Validation & Monitoring

Testing:

Key Metrics:

Failure Modes:

ℹ️ Note: Track trace numbers from responses—they are essential for reconciliation and dispute resolution.

Key Takeaways

Next Steps

  1. Review Fed services pricing docs – Understand 2025 discounts and prepare for fee reinstatement.
  2. Use Fed sandbox – Start integration using Fed’s real sandbox, not placeholders.
  3. Build fee dashboards – Monitor RTN participation and transaction tiers.
  4. Normalize ISO 20022 across rails – Prepare for Fedwire, FedNow, RTP messaging consistency.
  5. Investigate PSP options – Leverage FIS, Jack Henry, or Fiserv for simplified integration and compliance.

Acronyms and Terms

References

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At BuildTales.dev, Suma Manjunath is passionate about writing, intentional tech, and the messy magic of building great software teams.

If you enjoyed this article, explore more stories in these series:

  • 💳 Payments Series – ACH, card networks, faster payments, wallets, crypto
  • 🧭 Leadership Series – Systems thinking, organizational growth, decision-making
  • 🏗 Systems Series – Architecture, resilience, scaling patterns for software engineers

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