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Case study

Regional Bank Establishes Direct Connection to FedNow®, Marking New Era of Faster Payments

Finance and Banking

Challenge

After working with Endava to build RTP Send and Receive functionality, a regional bank wanted to take their payments capabilities to the next level with FedNow®. With many technical steps involved in the process, the bank looked for a partner with instant payments expertise.

Outcome

Our teams built and tested the required payment flows, as well as others prioritized by the business, successfully establishing a connection to the Federal Reserve in October 2023. Moving forward, the bank is in a great position to launch fully with FedNow services.

Real-time and instant payments are gaining momentum in the US, and with services like The Clearing House RTP® and FedNow on the rise, it’s a more critical time than ever for financial institutions (FIs) to modernize their payments strategies.  

After working with Endava to build RTP Send and Receive functionality, a regional bank wanted to take their payments capabilities to the next level with FedNow. By building their connection to this brand-new payment rail, the bank will broaden their capabilities for customers, create opportunities for cost savings, and further establish themselves as an innovative market player.  

Preparing for a direct connection

FedNow was launched by the Federal Reserve in July 2023, and requires FIs to build several message flows leveraging ISO 20022. FIs must also undergo rigorous testing and certification ahead of their participation in the service.  
 

Many FIs have chosen to leverage a service provider for connectivity, however this client desired a direct connection. In this instance, the bank had recently worked with Endava on RTP, and looked for similar strategic and technical support to build out their connection to FedNow.  
 

The bank’s main challenges included: 

  • Leveraging existing RTP functionality where appropriate to secure a faster speed to market and reduce overhead 
  • Navigating the complexities of a new instant payments service 
  • Sourcing subject-matter expertise on FedNow and ISO 20022 
  • Building capabilities in-house to comply with timelines and regulations 

Building the right approach

Working closely with the bank, Endava led a comprehensive review of current systems, capability requirements and timelines to create a roadmap for technical development. From there, Endava built all mandatory and prioritized optional message flows for the bank’s FedNow minimal viable product offering.  
 

To facilitate smooth and independent testing, the team also built an “On Us” testing tool by getting approval from the Fed to act as both a Sender and Receiver of funds in the test environment. This allowed the team to send messages to themselves and eliminated the need to request messages from the Fed or another participant.   
 

The engagement included Endava preparing the bank with necessary technical components and rigorous message testing with the Federal Reserve, as well as detailed guidance on other necessary components that the client desired to complete themselves, such as servicing and accounting.  

 

Our approach included: 

  • Determining components that could be reused from RTP development to create efficiencies 
  • Bringing together onshore and nearshore teams to seamlessly support the project  
  • Providing subject-matter expertise and advisory to prepare the bank for a Q1 2024 launch 
  • Designing and building the architecture and developing all mandatory and prioritized optional flows with necessary ISO 20022 messages 
  • Rigorous message certification testing with the Federal Reserve, enhanced with the ability and approval to act as both a Sender and Receiver of funds in the test environment

This bank is innovative, and it was important to them to establish a connection to FedNow directly, rather than through a service provider. After working with the bank on RTP, we optimized our approach and development to best support this new payment rail, empowering them to launch FedNow efficiently and effectively.

Stephanie Joyce

Senior Consultant, Endava

Ready for launch

Organizing the project into prioritized sprints, our teams began building and testing the required payment flows, as well as others prioritized by the business, successfully establishing a connection to the Federal Reserve in October 2023.  

 

Furthermore, the team was able to complete extensive testing with the Federal Reserve. Backed by our strategic advice and instant payments expertise, the bank has completed all scenarios required for Certification of Messaging and is well-positioned to fully launch FedNow services in early 2024.  
 

Overall, the FedNow project has achieved these milestones: 

  • Established connection to the Federal Reserve within 6.5 months 
  • Completed all mandatory and prioritized development for a Receive Only, direct connection, as well as passed all required scenarios for Certification of Messaging in 9 months 
  • Developed “On Us” testing capability, enabling the bank to act as both Sender and Receiver in the test environment 
  • Scaled project for completion of all mandatory flows, as well as one prioritized optional flow that was important to the client 
  • Empowered bank in their continued payments modernization 

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