FedNow readies cross-border support for U.S. banks

FedNow has moved closer to supporting cross-border payments as Federal Reserve Financial Services prepares early institutions to test enhanced messages for the U.S. leg of international transactions.
Summary

• FedNow will support cross-border use cases while settling only the U.S. domestic payment leg directly.
• Early adopters will test enhanced ISO 20022 messages before wider participant access becomes available nationwide.
• Regulation J changes remain proposed, with cross-border functionality still contingent on Federal Reserve approval processes.
• Payall is among early adopters testing FedNow cross-border support for financial institutions serving global customers.
• FedNow settled nearly $275 billion across about five million payments during the second quarter alone.

Federal Reserve Financial Services announced the next phase on Sept. 23, saying participating financial institutions will be able to combine FedNow domestic settlement with established correspondent-banking arrangements that move the international portion of a payment.

The planned capability does not turn FedNow into an end-to-end global settlement network. FedNow would settle the U.S. portion between participating domestic institutions, while banks or other approved intermediaries would continue handling the overseas leg through the cross-border arrangements selected by each participant.

FedNow going cross-border is not what it sounds like.

The Fed's own proposal: a correspondent bank handles the international leg, FedNow settles the US domestic leg in seconds. The foreign mile still runs on whichever rail the correspondent picks.

So the slow, expensive part of... https://t.co/JPFYngLJUv --- Wave of Innovation (@wave_of_innov) September 23, 2026
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FedNow cross-border payments will keep a domestic settlement leg

The Federal Reserve has been preparing the legal structure for this model since April, when the Board proposed amendments to Regulation J allowing FedNow participants to use intermediaries other than Federal Reserve Banks in a funds transfer. Current rules have effectively limited FedNow to domestic transactions because only two U.S. banks, apart from a Reserve Bank, can participate in a transfer chain.

Under the proposal, a financial institution could use a correspondent bank or another permitted intermediary for the international portion and FedNow for the U.S. portion. The Federal Reserve said in its rulemaking that the model could support private-sector cross-border payment services without having the central bank operate the foreign leg itself.

FedNow currently operates 24 hours a day, seven days a week, including Federal Reserve holidays. Federal Reserve Financial Services states that each service business day runs continuously except for its technical cycle-date rollover process.

The Federal Reserve's August review of U.S. cross-border payment work said FedNow had remained domestic since its July 2023 launch, while demand from banks for international use had increased as instant payments expanded. The same review noted that Fedwire migrated to ISO 20022 in July 2025, creating more common messaging across international payment chains.

Early adopters will test enhanced ISO 20022 messages

Federal Reserve Financial Services said a group of early adopters will test new FedNow message formats designed to carry information needed when the underlying payment involves a sender or recipient outside the U.S.

Payall Payment Systems is one of the named participants. President and CEO Gary Palmer said the company's integration is intended to provide financial institutions with faster and more transparent processing for the U.S. portion of international payments while digitizing compliance and transaction-risk checks.

Payall described its role as helping banks "un-nest" payment chains, screen parties and automate risk controls. Those are company claims about its infrastructure and do not establish that every international payment using the future FedNow capability will process faster or at lower cost.

The company's involvement follows earlier work with FedNow. Payall has previously completed FedNow testing and certification to support participating financial institutions, while its services cover cross-border payment orchestration and compliance systems.

Technical preparation began months before the latest announcement. Federal Reserve Financial Services said in April that enhanced ISO 20022 specifications were available through its MyStandards portal, allowing institutions active in international commerce to begin preparing system changes during 2026.

Once testing progresses, the Federal Reserve says other FedNow participants will be given the opportunity to adopt the enhanced messages. No general launch date has been published.

Regulation J approval remains required before full rollout

The most important unresolved step is regulatory approval. The Federal Reserve Board's current rulemaking portal still lists docket R-1891 as a "Rulemaking Proposal." The public comment period closed June 9, but the Board has not posted a final rule replacing the proposal as of Sept. 24.

The Sept. 23 FedNow announcement carries the same limitation. The functionality remains contingent on required amendments to Regulation J and corresponding changes to Operating Circular 8 receiving approval from the relevant Federal Reserve governing bodies.

Operating Circular 8, or OC 8, contains the operating terms for transfers through FedNow. Federal Reserve Financial Services currently lists the April 1, 2026 version as the effective circular, alongside operating procedures that took effect April 28.

Industry feedback on the Regulation J proposal raised compliance questions that the final framework may need to address. The American Bankers Association, for example, recommended clarifying how sanctions, anti-money laundering and fraud checks should work when a FedNow payment forms part of a cross-border chain. The group asked that banks be able to delay or reject payments where required to complete legally mandated screening.

Stripe's comment on the proposal separately argued that the existing FedNow operating framework contained a residency restriction for certain ultimate customers and said operating-rule changes would be needed alongside the Regulation J amendment for the proposal to achieve its full cross-border purpose.

International payments will still rely on correspondent banks

The Federal Reserve's design keeps existing correspondent banking infrastructure at the center of the foreign portion of each transaction.

A payment could begin abroad, move through correspondent arrangements and use FedNow once it reaches the U.S. banking system. An outbound transaction could reverse that sequence, with FedNow processing the domestic transfer before an intermediary handles the payment beyond the U.S.

The model resembles structures already used with Fedwire, according to Federal Reserve Financial Services. It does not create direct FedNow access for foreign banks that lack the required U.S. participation structure, nor does it establish a Federal Reserve foreign-exchange service.

Potential uses identified by the Federal Reserve include international payroll, corporate payments, property transactions, insurance disbursements and global treasury activity. The exact speed of the complete international transaction will still depend on the foreign leg, correspondent relationships, compliance reviews and local payment infrastructure.

The distinction is relevant as banks, stablecoin companies and blockchain networks compete to shorten international payment chains. Column connected stablecoin conversion with FedNow, SWIFT and other payment rails, allowing businesses to route different portions of payments through separate settlement systems.

SWIFT began testing a blockchain ledger with 17 global banks for round-the-clock cross-border payments using tokenized commercial-bank deposits. FedNow's planned model remains based on conventional bank money settled through Federal Reserve accounts for its domestic portion.

FedNow volume has risen sharply before international expansion

FedNow enters the testing phase after rapid growth in domestic payment activity.

Federal Reserve Financial Services reported 4.997 million settled customer payments during the second quarter of 2026, up 83.2% from the first quarter. Their combined value reached $274.66 billion, compared with $271.25 billion during the previous three months.

Average daily volume rose from 30,317 payments in the first quarter to 54,921 in the second. Average payment size fell from $99,414 to $54,957 as transaction counts expanded more quickly than total dollar value.

For all of 2025, FedNow processed 8.41 million payments worth $853.4 billion. That represented 458.9% annual volume growth and more than 2,100% growth in settled value compared with 2024.

The network now spans more than 1,500 participating financial institutions. Federal Reserve Financial Services keeps separate current lists of live institutions, settlement agents and certified service providers, with its participant and provider files most recently updated Sept. 21.

In a separate domestic adoption move, Federal Reserve Financial Services announced a new discount program beginning Jan. 1, 2027, intended to encourage more institutions to activate and increase FedNow sending capabilities.

Cross-border testing is expected to proceed while the Regulation J process remains unfinished. Federal Reserve Financial Services has not published an exact date for general availability and says future progress updates will be provided to participants as testing, rule approval and Operating Circular changes advance.