FedNow's cross-border plan could speed up US leg, not UK's

The Federal Reserve has set out how it wants FedNow, the US instant payment system, to plug into international money transfers — but the plan is narrower than the phrase "cross-border capabilities" suggests. Federal Reserve Financial Services announced on 23 September 2026 that early adopters would begin testing enhanced message formats so that FedNow can settle the US domestic leg of a wider international payment. It did not announce a live international payment network, and it gave no firm date for when the capability would be generally available.

For UK banks, payment firms and businesses that pay or get paid in dollars, the distinction matters. FedNow would not connect to the UK's Faster Payments System or CHAPS, and it would not perform foreign-exchange conversion. What changes, subject to regulatory approval, is who is allowed to hand a FedNow payment on at the US end: a commercial correspondent bank, rather than only a Federal Reserve Bank. That is a plumbing change to the US endpoint of a transfer, not a new transatlantic rail.

The stakes are not trivial. The United States was the UK's largest services trading partner in both directions in 2024, according to the Office for National Statistics: the UK exported £137.0bn of services to the US, 27.0% of all UK services exports, and imported £61.2bn, 19.5% of UK services imports, both at current prices. Any change that makes the dollar leg of UK-US payments faster or more predictable is commercially relevant, even before any UK rail is touched.

What Regulation J currently blocks

FedNow is the Federal Reserve Banks' real-time gross settlement service for instant payments in the United States. It has operated since 20 July 2023 and settles individual payments within seconds, continuously, including weekends and holidays. Today, Regulation J and FedNow's operating procedures only allow a Federal Reserve Bank to act as the intermediary within a FedNow payment order itself. A commercial correspondent bank cannot be designated as that intermediary inside the FedNow transfer, even though correspondent banks already handle the surrounding international legs of a wider transaction outside FedNow. That rule was written for a purely domestic US payment system and becomes a constraint once firms want to use FedNow as part of something bigger.

In April 2026, the Federal Reserve Board proposed amending Regulation J to let a FedNow payment order designate a non-Reserve Bank intermediary — in practice, a correspondent bank already used for international payments. Federal Reserve Financial Services followed up on 23 September 2026 by confirming that early adopters would test the enhanced messaging this requires. The change is still only a proposal. It depends on the Board finalising the Regulation J amendments and revising FedNow Operating Circular 8, and no production date has been set.

How a transfer would actually move

The clearest way to understand the plan is to separate the legs of a transfer. Under the proposed model, everything before and after the FedNow payment stays outside FedNow. FedNow settles only the US domestic portion of a larger cross-border transaction; the international portion continues to move through established correspondent banking arrangements, as it does today.

Take an inbound payment, money arriving into the US from overseas. Once a US beneficiary bank accepts the FedNow order, Regulation J requires it to make the funds available immediately — that funds-availability rule doesn't change. Now take an outbound payment, dollars leaving the US for an overseas beneficiary. Regulation J has no power over a bank outside the United States, so it does not require the overseas beneficiary bank to credit the funds immediately. FedNow's own leg is instant either way; what happens next, in the UK, is governed by whatever UK arrangement, contract and regulation actually applies to the receiving institution — not by US law. That means an instant FedNow settlement in the US does not, by itself, guarantee an instant credit into a UK account.

Nothing in the proposal changes which institutions can connect to FedNow directly, or the payment flow between existing FedNow participants. A UK firm does not gain a route onto FedNow. It still needs a US banking partner: a correspondent or partner bank that is itself a FedNow participant, plus its own arrangement for the sterling leg, the foreign-exchange conversion, and access into that US institution.

Not a transatlantic instant-payment system

It's worth being blunt about what this is not. The Bank of England's Faster Payments System and CHAPS are not being linked to FedNow under this proposal. FedNow performs no foreign-exchange function. And the "cross-border" language in Federal Reserve promotional material sits alongside a legal filing that describes transfers before and after FedNow as separate transactions, with FedNow access unchanged. A reader should treat this as an upgrade to the US endpoint of existing correspondent-banking routes, not the creation of a new international settlement system.

There is a second point worth flagging plainly: as of 27 September 2026, the capability is not generally live. The Federal Reserve's own FAQ still describes the currently available service as supporting only domestic payments between US depository institutions. Early adopters are preparing to test enhanced messages; wider participant access is promised to follow, without a stated date. Federal Reserve Financial Services separately lists 1,900 FedNow participants, with its list last updated 21 September 2026 — but being a FedNow participant does not show which institutions will send cross-border messages, or which will offer that access to a UK bank or fintech.

What UK providers and businesses might gain

If a UK bank or payment firm has, or builds, a suitable relationship with a US correspondent that adopts the capability, the plausible gain is a faster, round-the-clock US domestic leg: quicker dollar payouts to US suppliers, employees or marketplace sellers, or quicker collection of dollar receivables, without waiting for US banking hours. Early adopters are due to test enhanced message formats for that leg, though the packet does not establish what data those messages will carry or whether it survives intact across the wider correspondent chain. None of this is measured yet — no production data on end-to-end timing, rejection rates or cost were available in the material the Federal Reserve and BNY have published, so any improvement remains an expectation rather than a demonstrated outcome.

Transaction size is capped on the US side regardless: FedNow's network limit for customer credit transfers and payment returns is $10m per transaction, effective 12 November 2025, and individual banks may set lower limits still.

Compliance does not get faster because settlement does

Speeding up settlement does not remove anyone's sanctions, anti-money-laundering, know-your-customer or fraud obligations. The Federal Reserve's own proposal says the amendment itself creates no new reporting, recordkeeping or compliance requirements — but that is a statement about the rule, not about the work firms will need to do to meet the duties they already have. BNY, in its comment on the proposal, told the Federal Reserve that participants would probably need real-time sanctions screening and asked for clearer rules on anti-money-laundering, know-your-customer, fraud, liability and timing responsibilities across chains that run through several banks. Those two positions are not a straightforward contradiction: one addresses formal new rules, the other addresses practical implementation. Both are true.

In the UK, financial-sanctions duties continue to apply independently of how quickly a payment rail moves, under the framework set out in the Office of Financial Sanctions Implementation's general guidance on UK financial sanctions. The FCA, for its part, has published findings on firms' sanctions-screening systems, saying they should be proportionate, properly calibrated, regularly tested and backed by effective alert handling; its 2024–25 data show that nearly six in 10 firms that screen payments already do so in real time. A FedNow payment itself is immediate and irrevocable once accepted, which raises the stakes on getting screening and controls right before a payment is sent, rather than after.

Friction that stays outside FedNow

The Bank of England has repeatedly identified the causes of cross-border payment delay and cost: fragmented data standards, repeated compliance checks at each hop, limited operating hours, legacy systems, funding costs and long intermediary chains. None of that is solved by FedNow moving faster on the US side alone. Foreign-exchange execution, prefunding, correspondent cut-off times and exception handling — what happens when a later leg is rejected or held for review — all sit outside the FedNow payment and outside this proposal.

UK settlement hours are one concrete example. CHAPS currently runs 06:00 to 18:00, Monday to Friday. The Bank of England plans to extend that to a 01:30 opening from September 2027, subject to final confirmation, which would still leave an 18:00 close on a 16.5-hour window rather than FedNow's continuous operation. A UK leg routed through Faster Payments, CHAPS, an internal book transfer or another arrangement will carry its own timing constraints whatever happens on the US side, and the Federal Reserve's proposal does not decide which UK route a given payment uses.

What to watch next

Readers with a direct commercial interest — banks, payment firms and businesses that regularly pay or collect dollars — should watch for the final Regulation J rule and revised Operating Circular 8 from the Federal Reserve Board, named pilot participants and a stated production date from Federal Reserve Financial Services, and any provider disclosures on pricing and end-to-end timing once the capability moves beyond testing. The Bank of England's own RTGS and CHAPS settlement-hours work, running on a separate timetable, is worth tracking alongside it, since UK settlement-hour limits will keep applying to the UK leg of any transfer regardless of what changes at the US end.