The Federal Reserve is developing additional tools to help financial institutions that use its FedNow instant payment system combat fraud, a FedNow official said recently.

The central bank is focusing on adding these features as banks and credit unions in the real-time payments system seek to manage risk and combat fraud under the year-old Fed system.

The Fed’s launch of FedNow in July 2023 was the biggest advancement in the U.S. payments system in about 40 years. The system took years to develop, and the Fed is trying to get U.S. banks and credit unions to adopt the system so that payments can be accelerated across the U.S. While payments can sometimes take days to process, FedNow can process them in seconds.

The central bank has already provided tools related to “value limits and negative lists,” but more features are in the pipeline, FedNow CEO Nick Stanescu said recently in a fintech podcast.

“We will introduce some new features for the correspondent banks participating in this service, new opportunities that will help them control some of their liquidity,” Stanescu said. July 26 during the Wharton FinTech Podcast“We will also release some additional tools that define cumulative value or velocity thresholds” to give financial institutions the ability to reject payments based on thresholds.

The central bank also expects to continue to look for additional ways to allow banks to set guardrails. Some participants in a FedNow town hall webcast last year expressed concerns that faster payments could lead to faster fraud.

“This is an area we will continue to focus on when it comes to releasing additional features and tools,” Stanescu said, noting that users recently stressed the importance of remaining vigilant in this regard and addressing the fraud problem as an industry and working with the private sector to prevent fraud.

The Fed has now included almost 900 US financial institutions in the FedNow system. While there are about 10,000 banks and credit unions in the US, the Fed aims to include about 8,000 of these institutionsThe central bank has refused to disclose the volume of payments processed through the new system.

Stanescu also spoke about the challenge of building a system tailored to a variety of financial institutions in the US

“One of the biggest challenges we’ve faced in the U.S. is not just the size – the number of financial institutions, but the diversity of banks and credit unions in terms of their knowledge and understanding and willingness to do instant payments,” Stanescu said during the podcast.

With a fully digitized process for onboarding financial institutions, the Fed can onboard financial institutions into the system within eight days, he said. “This is an area where we will continue to improve,” he added.

As for third-party collaborations in the U.S. with FedNow, Stanescu noted that fintechs looking to partner with financial institutions have a roadmap for these partnerships. about the website which facilitate these bonds.