FedNow and P2P: Complementary Forces in the Future of Payments

By Mark Keeling 

The launch of the FedNow® Service in 2023 marked a watershed moment in the evolution of payments infrastructure in the United States. As the first new payment rail introduced by the Federal Reserve since ACH in the 1970s, the FedNow Service enables financial institutions to send and receive payments instantly – 24/7/365 – with real-time settlement. But as financial institutions explore its potential, many are asking: how does FedNow relate to peer-to-peer (P2P) payments, and how are they different?

At Catalyst, we see FedNow and P2P not as competing technologies but as complementary tools that, together, unlock a new era of speed, flexibility, and member satisfaction.

Understanding the difference

FedNow is a payment rail – a backend infrastructure that connects financial institutions for instant clearing and settlement of funds. It does not have a user-facing interface, such as a digital banking page or mobile app. Think of it as the highway that moves money between financial institutions in seconds. P2P, on the other hand, is primarily a use case for sending money digitally between one or more parties, either consumers or businesses, through mobile apps and digital platforms. P2P payments can run over a variety of payment rails, including FedNow instant payment rails, and through a variety of interfaces – from banking interfaces to digital wallets.

While P2P services have popularized digital payments to others – individuals and businesses – they often rely on legacy systems like ACH and debit rails or proprietary platforms controlled by private entities. FedNow changes that by offering true instant settlement on an open platform available to all financial institutions.

How they work together

Catalyst’s P2P solution is designed to integrate seamlessly with a number of payment rails, including FedNow. When P2P payments move over the FedNow instant payment rail, members enjoy a fast, secure, and branded payment experience. Whether it’s splitting a dinner bill or disbursing funds to a wide audience, members can initiate payments through their credit union’s digital banking system, and FedNow ensures the funds arrive instantly.

Why it matters

The convergence of FedNow and P2P empowers credit unions to reclaim their role as the best way for members to move money. Instead of ceding ground to third-party apps, institutions can offer their own instant payment solutions that are branded, secure, and deeply integrated into their digital banking platforms, keeping funds in their accounts until needed.
For members, P2P payments running over FedNow instant payment rails mean faster access to funds, fewer delays, and more control. For credit unions, it means stronger engagement, reduced costs, and greater retention of both account funds and members.

Beyond the P2P Payment Use Case

As discussed earlier in this post, the FedNow Service is a payment rail, not a P2P service. While P2P payments can run on the FedNow rail and benefit greatly from its speed and ubiquity, FedNow instant payments can be used for a wide range of services and solutions. The Federal Reserve has identified well over 100 different use cases for FedNow instant payments, from instantly funding loans to moving money between member financial institutions.

Ready to bring real-time payments to your members? 

At Catalyst, we’re proud to be a FedNow pilot and launch partner, and we continue to innovate with solutions that bring instant payments to life. FedNow and P2P aren’t just technologies; they’re the foundation of a better, faster, and more connected financial future.

Let Catalyst show you how FedNow and P2P can work together to transform your payment experience. Contact us today to start your instant payments journey.

ABOUT CATALYST

Catalyst is a wholesale cooperative financial institution serving over 1,300 credit unions nationally with innovative core financial services and exceptional back-office support. Services, designed specifically for the credit union industry, include payment solutions, liquidity, investment options and balance sheet management assistance.