FedNow® Provider Checklist: 10 Questions Every Financial Institution Must Ask
In February 2025, The Clearing House (TCH) raised the transaction limit for Real-Time Payments (RTP) from $1 million to $10 million. This change marks a turning point for investment banks, allowing high-value B2B payments to be settled instantly - 24/7/365.
At the same time, new On-Behalf-Of (OBO) rules are being implemented. These establish formal compliance expectations for banks and fintechs initiating payments for clients - especially critical in custody, fund services, and institutional treasury. Full compliance will be required by April 2026.
Together, the increased RTP limit and OBO framework open the door for modernized, compliant, and efficient real-time infrastructure, especially when combined with flexible accounting systems and virtual accounts.
The Strategic Benefits That Matter to Your Bottom Line
Operational advantages that drive efficiency
Instant settlement eliminates counterparty exposure entirely. No more three-day settlement windows where risk accumulates. No more wire cutoff times forcing clients to wait until the next business day. With 24/7/365 availability, institutional clients can move $10 million at 2 AM on a Sunday if needed.
This also transforms operations. Real-time confirmation ends the need for multi-layered reconciliation cycles. When payment, settlement, and confirmation happen in a single atomic event, the back office becomes lighter, faster, and less costly.
Client experience that commands premium fees
Institutional clients manage billions in assets. Every hour funds sit in settlement limbo costs opportunity. When capital moves instantly, clients unlock real-time opportunities - whether it’s a time-sensitive M&A deal or a margin call over the weekend. Offering instant, trackable, irrevocable payments is becoming the new standard. Banks delivering on that promise can justify premium pricing.
The regulatory compliance advantage
Investment banks that modernize their payment systems to support instant payments not only improve efficiency, security, and customer satisfaction but also position themselves ahead of the curve to seamlessly comply with the new On-Behalf-Of (OBO) rules on the RTP network.
By adopting early, they gain a competitive edge by offering transparent, real-time, and regulated high-value payment services well before the April 2026 deadline, while others scramble to catch up. This proactive approach turns regulatory compliance into a strategic advantage that drives innovation, operational excellence, and market leadership.
Preparing for OBO Compliance by April 2026
New RTP rules now require banks initiating payments on behalf of clients - common in custody, brokerage, and fund services - to meet stricter standards around transaction transparency, real-time fraud detection and client authorization and audit trails.
For investment banks on legacy systems, early upgrades are key. This includes:
- Modernizing or surrounding core payment platforms
- Enabling virtual accounts and sub-ledgers
- Embedding KYC, fraud checks, and metadata into workflows
- Adopting composable, event-driven infrastructure via trusted partners
The approach: Aligning payments and accounting
Investment banks are consolidating payments and accounting into real-time, rail-agnostic platforms using sub-ledgered virtual accounts. These composable, dynamic accounts support:
- Live balance tracking
- Effortless reconciliation
- Smart routing by payment rail
- Event-driven workflows like sweeps and capital calls
The result is a transparent, responsive ecosystem built for speed, compliance, and client confidence.
Strategic RTP Use Cases for the Modern Investment Bank
Venture Capital & Private Equity: Speed to capital
Capital calls are no longer held hostage by slow wires. Limited Partners (LPs) can fund commitments in real time, startups get faster access to capital, and portfolio exits become instant distributions. Instant payments are becoming the backbone of private equity velocity.
Securities & Trading: Beyond T+1 to real-time
While the industry celebrates T+1 settlement, investment banks with RTP and FedNow capabilities can offer something better: real-time settlement. Margin calls get fulfilled instantly - no more weekend exposure waiting for Monday wire transfers. Failed trades resolve immediately instead of lingering as multi-day headaches.
Corporate Treasury: Sweeps, funding & fast liquidity
Cash concentration takes on new meaning when subsidiaries can sweep $10 million to headquarters instantly. Payroll, tax payments, and internal funding across global subsidiaries now happen in seconds, not days.
Raising the RTP limit to $10 million quietly shifts what’s possible in corporate finance. Tasks like cash sweeping, payroll, tax, and internal funding—once bound by batch cycles—can now happen instantly. For modern treasury teams, that means better control, faster decisions, and fewer end-of-day workarounds. It’s a practical change with strategic impact.
Finzly is here to help investment banks navigate these changes with modern, scalable platforms designed for the new era of real-time, compliant payments. Schedule a demo here.
