Banks and credit unions that want to send money across borders could soon plug into the Federal Reserve’s instant-payment rail for the domestic leg of those transfers. The Fed proposed amending Regulation J to let private intermediaries route funds through the FedNow Service on behalf of participating institutions, a change that would extend a system built for U.S. payments into the first stage of international transactions. Public comments on the proposal, filed under docket FR-2026-0011-01, close on June 8, giving the industry just over a week to weigh in.
What the Fed actually proposed and why it matters
The Federal Reserve Board has requested public feedback on a rule change that would allow U.S. banks to use correspondent banks for the international portion of a cross-border payment while settling the domestic portion through FedNow. Under current rules, only Reserve Banks act as intermediaries on the FedNow rail. The proposed Regulation J rewrite would open that role to private-sector entities, creating a hybrid path: FedNow handles the dollars moving inside the United States, and a correspondent bank carries the funds across borders.
FedNow itself has been live since July 20, 2023, providing round-the-clock instant settlement for enrolled banks and credit unions. Until now, the system has served only domestic transfers. The proposed amendment does not turn FedNow into a global wire network. Instead, it lets the existing instant rail serve as the on-ramp or off-ramp for money that ultimately crosses a border through traditional correspondent channels.
For a small business waiting on an overseas supplier payment, the practical difference is speed on the U.S. side. Rather than batching the domestic settlement through older systems, a bank could clear the dollars in seconds through FedNow before handing the transaction to a correspondent for the foreign-currency leg. The international portion would still move at whatever pace the correspondent network allows, but the domestic delay shrinks to near zero.
What the public record shows so far
The Fed’s own docket summary confirms that the rule change is designed to support private-sector cross-border payment solutions, not to replace correspondent banking. The document describes a framework in which private intermediaries could participate in FedNow transactions while remaining outside the Federal Reserve System, as long as they act on behalf of a FedNow-participating depository institution. The full text of the proposed amendments is referenced on the docket page, but the Fed has not published internal modeling or pilot data on how intermediary settlement risk would be managed under the new framework.
At least one major trade group has already filed comments. The American Bankers Association, through senior vice president Stephen Kenneally, submitted comment letter FR-2026-0011-01-C18 to the Fed’s public docket. The ABA letter signals support for faster settlement but flags concerns about whether intermediary rules will keep settlement finality clear for every participant in a multi-party chain. That tension between speed and legal certainty is likely to shape the rest of the comment period, especially for institutions that rely heavily on correspondent relationships for foreign-exchange flows.
What remains uncertain about the cross-border expansion
The proposal leaves several practical questions unresolved. One is how liability will be allocated if a cross-border payment fails after the domestic leg has already settled in real time. Under existing FedNow rules, payments are generally irrevocable once processed, which simplifies domestic disputes but becomes more complex when a private intermediary and a foreign institution sit between the originator and the final beneficiary.
Another open issue is how many intermediaries can sit in the chain while still preserving the “instant” character of FedNow on the U.S. side. The rule text contemplates private entities acting on behalf of participants, but it does not spell out operational standards for uptime, message formats, or cutoffs when those entities bridge between FedNow and slower or less predictable foreign systems. Banks that currently rely on batch processing for cross-border payments may need to retool compliance and fraud controls to operate in a near-real-time environment domestically while still managing longer settlement windows abroad.
There are also questions around transparency for end users. If a U.S. customer initiates a cross-border payment through a bank that uses FedNow for the domestic hop and a correspondent for the rest, it is not yet clear how much detail they will receive about timing, fees, and foreign-exchange rates at the point of initiation. The proposal focuses on legal and operational relationships among institutions, not on consumer disclosures.
Finally, the broader competitive impact is uncertain. Allowing private intermediaries into the FedNow flow could encourage new cross-border products that compete with existing wire and remittance services, but it could also reinforce the role of large correspondent banks that already dominate international clearing. With comments due by June 8, the banking industry has limited time to argue for clarifications on risk-sharing, operational standards, and customer protections before the Fed decides whether to finalize the Regulation J changes and open FedNow’s instant rail to the first leg of global payments.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
