Jack Henry Ready to Connect CUs to Upcoming FedNow RTP Network

FedNow, a new real-time payments (RTPs) infrastructure created by the Federal Reserve, is expected to launch this July, and Jack Henry is standing by to support its bank and credit union clients that wish to connect to the new network, according to a Monday announcement.

The Monett, Mo.-based Jack Henry, which provides core processing and other financial technology services, said it has been actively participating in the development of FedNow – the second U.S. RTP system scheduled to launch in the U.S., behind the six-year-old The Clearing House. Now, over 20 of its clients are set to join a pilot and early adopter program through the new network, which will become part of Jack Henry’s proprietary payments hub, JHA PayCenter.

“Processors play an important role in enabling the FedNow Service for many financial institutions,” Ken Montgomery, Federal Reserve Bank of Boston first vice president and FedNow Service program executive, stated. “We appreciate the commitment that Jack Henry has made to be ready to deliver instant payments services when we launch in July.”

According to the announcement, FedNow will move funds directly and immediately between financial institution accounts in the U.S., initially supporting multiple use cases and serving as a platform banks and credit unions can leverage to develop innovative payments solutions that support evolving instant payment needs and additional use cases. The JHA PayCenter, which already supports The Clearing House’s RTP network, is configured to connect Jack Henry’s core and digital solutions to the faster payment networks and also can be leveraged to connect third-party core and digital platforms, the company said.

Tede Forman, president of Jack Henry Payment Solutions, commented, “Today’s convenience-driven consumers and businesses expect to move money in the moment of need, so real-time payments have evolved into competitive necessities. Based on the high and growing demand for instant payments, and the fact that more than half of all U.S. DDA accounts (demand deposit accounts) are now connected to a faster payments network, banks and credit unions simply can’t compete without offering real-time payments and meaningful use cases. We made a strategic commitment to help our clients modernize their payment strategies and platforms with the real-time payments solution or solutions that enable them to remain at the center of the payment experience and to ultimately reduce payments friction and financial fragmentation.”

One credit union that is set to participate in Jack Henry’s FedNow pilot and early adopter program is the $2.3 billion, Honolulu-based HawaiiUSA Federal Credit Union.

“Over two years ago, we were elated to be chosen as one of the 120 organizations in the FedNow pilot program,” Scott Young, vice president of payments operations for HawaiiUSA, stated. “We decided to be part of the program because we wanted to have input on how the instant payments rail was going to operate and ensure that the needs of financial institutions in Hawaii were being considered. FedNow will level the playing field and help us compete with the large financial institutions on the mainland.”

The Scottsdale, Ariz.-based consulting company Cornerstone Advisors’ “What’s Going On In Banking 2023” report stated that in a Q4 2022 survey of 300 community financial institution executives, 77% of credit unions said they had already implemented or planned to implement RTPs. Twelve percent said they had already launched the service, 30% planned to in 2023 and 35% planned to in 2024.

What’s more, in the survey, 24% of bank and credit union respondents said they were waiting for the FedNow service to launch to deploy RTPs (38%, however, said they hadn’t yet determined an RTP strategy).