FedNow May Open A Faster Dollar Leg For Cross-Border Payments

FedNow Could Handle The U.S. Leg Of Cross-Border Transfers

The Federal Reserve is considering a Regulation J change that would let FedNow participants use intermediaries other than Federal Reserve Banks when sending funds through the instant-payment service.

In plain terms, a U.S. bank could use FedNow for the domestic settlement leg while a correspondent bank or another intermediary handles the international part of the transfer.

That sounds technical because it is.

The policy question is more familiar: fintech firms want the dollar leg of cross-border payments to move at instant-payment speed, while banks do not want that speed to outrun sanctions checks and risk controls.

Since July 2023, FedNow has operated as a 24/7 year-round rail for instant payments.

Its current rules block non-Federal Reserve intermediaries, which keeps the network effectively domestic when a payment needs another bank in the chain.

The proposed change would make FedNow look a little more like Fedwire's intermediary model, but without turning it into a global payment network by itself.

The demand signal is speed.

The cited research found that 43% of U.S. small and medium-sized businesses that source internationally named faster settlement as their top cross-border payments priority.

It also found that 27% are open to switching providers.

That is why Stripe, Wise and other payment companies care about a rule change most customers will never read.

Fintech Support Comes With A Residency Problem

Stripe backed the proposal and said it closes a gap in U.S. payment infrastructure.

Its argument is straightforward: businesses moving dollars across borders do not have continuous access to real-time USD settlement because Fedwire and same-day ACH are not always available, while FedNow remains largely domestic.

Stripe also pointed to a remaining constraint.

FedNow's on-behalf-of residency restrictions still require the ultimate end customer in some flows to be a U.S. resident or U.S.-domiciled entity.

If that rule stays in place, the cross-border benefit could be narrower than fintech providers want.

Wise also supported the proposal and described FedNow's domestic-only design as an artificial disparity with Fedwire.

For firms that already connect to payment systems in multiple countries, the appeal is not a new consumer app.

It is the chance to join real-time dollar settlement inside the United States to international payment workflows that already exist elsewhere.

Banks Want Guardrails Before Instant Cross-Border Scale

Bank groups broadly supported the goal, but their comments focused on operational risk.

The Clearing House and the Bank Policy Institute warned that FedNow participants would likely need real-time sanctions screening for cross-border transactions because instant payments settle immediately and are generally irrevocable after processing.

The associations asked for a specific message code to identify cross-border transactions and a two-phase implementation strategy.

In their preferred model, institutions would first opt into cross-border FedNow activity during an initial pilot period.

Wider obligations would come later, depending on industry readiness and pilot results.

BNY called for clear guardrails and defined responsibilities for intermediaries and risk allocation.

That is where the real argument sits.

A faster message is useful only if banks can still satisfy sanctions, know-your-customer, data-sharing and local payment-system rules across jurisdictions.

The proposal would remove one U.S. connectivity constraint.

It would not make foreign regulators, central banks or payment-system operators move at the same speed.

If the Fed gets the balance right, FedNow could become a useful real-time dollar leg for international payment providers.

If the compliance model is too vague, banks may support the idea in principle while keeping actual usage cautious.