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The US Federal Reserve has taken a potentially significant step towards extending FedNow beyond purely domestic payments.
By opening a 60-day consultation on proposed amendments to Regulation J, the central bank is considering whether participants in its instant payments service should be allowed to use intermediaries other than reserve banks when transferring funds.
That may sound technical, but the implications are material: it could create a pathway for FedNow to support the US leg of cross-border instant payments for the first time.
A domestic rail with international potential
Since its launch in July 2023, FedNow has been designed as a domestic real-time gross settlement rail. Under the current framework, transfers can involve only two US financial institutions and a reserve bank, effectively preventing international usage.
The proposed rule change would not make FedNow a global network in itself, but it would allow a US participant to use an intermediary, such as a correspondent bank, for the international leg of a transaction while still settling the domestic portion through FedNow.
That would bring the service closer to the wider international direction of travel. Policymakers and market infrastructures globally are under pressure to make cross-border payments faster, cheaper and more transparent, yet progress remains uneven.
In that context, the Fed’s proposal looks less like a radical departure than a belated acknowledgement that domestic instant payment systems cannot remain isolated indefinitely.
Opportunity, but no quick fix
Even so, access alone will not deliver interoperability. Foreign exchange, sanctions screening, AML compliance and differing regulatory standards remain formidable obstacles.
There is also a strategic question over who will occupy the intermediary layer. Traditional correspondent banks are obvious candidates, but card networks and other payments players are investing heavily in cross-border infrastructure and may see an opening.
For FedNow, the proposal is best understood as an enabling move rather than a finished solution. It signals international ambition, but whether that ambition translates into a genuinely faster and simpler cross-border experience will depend on the market structure that emerges around it.
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