Jack Henry & Associates and ACI Worldwide are among the payments companies gearing up for the launch later this year of the Federal Reserve banks’ new real-time payments system, called FedNow.
It’s the most significant federal government initiative on the payments front in decades, aimed at updating the Fedwire system with a faster, more efficient means of sending money in the U.S. It has been in development for years and is expected to start up as early as May.
Jack Henry expects to be the first core provider of technology services to banks to go live with FedNow and it plans to start beta testing in May or June, the company’s CEO, David Foss, said at an investor conference this week. Then it will be 90 days to 120 days before general availability of FedNow through Jack Henry, he predicted.
“The Fed is very committed to this platform — they believe it is a revolutionary technology for them,” Foss said at the KBW Fintech Payments conference on Wednesday. “They’re really excited about this technology as a platform to facilitate real-time payments and really be a player in that space.”
Jack Henry provides services to credit unions, and to small as well as mid-sized banks, with the company having added some larger financial institutions in recent years.
It will be natural for most of Jack Henry’s financial institution clients to connect to the new FedNow platform because they already have a tie to the Fed and the company can offer them the service, alongside other real-time payment offerings like those from The Clearing House and Zelle, through a single integration, Foss said. He considers his company’s connection superior to some rivals that are seeking to provide a single-point integration for FedNow.
Nonetheless, it remains to be seen what demand for the new service will look like, Foss said. “There’s a lot of work to be done yet between the two organizations,” he said.
Foss said he talked with then-Federal Reserve Vice Chair Lael Brainard last month regarding the FedNow project (she was recently appointed by President Joe Biden to become the director of the National Economic Council this month).
At ACI, the company’s interim CEO, Thomas Warsop, believes that FedNow is part of a worldwide “real-time payments revolution” that his company is tapping to build its business. ACI is already connected to real-time payment systems in 25 countries.
The U.S. is playing catch-up on the real-time payments front, Warsop noted this week during an earnings call with analysts to discuss the company’s fourth-quarter financial results.
“It’s going to grow much faster than it has in the past and I think Americans generally are going to get a lot more comfortable with the idea of real-time payments which is great for us because we’ve been making investments for some time and we are prepared for that to start to take hold,” Warsop said on the March 1 call.
Those real-time services currently make up about 10% of its business, but the company plans to expand real-time capabilities across its offerings, ACI Chief Financial Officer Scott Behrens said on the call.
“We’re trying to make sure we get ourselves inserted into as many of these (real-time payments) schemes around the world as we can, and I think we’re off to a very good start,” Warsop explained.
As far as a boost in revenue for Jack Henry from the new FedNow services to be offered, Foss isn’t overly optimistic about that income. “I don’t think it will be a huge needle-mover,” he said during the presentation. “It is certainly transaction revenue for us. We’re trying to be reasonable in our pricing.”