The Federal Reserve Building in Washington, DC
Win Mcnamee | Reuters
The Federal Reserve launched its FedNow instant payment service on Thursday after spending several years developing a system that officials say will allow faster cash flows for businesses and individuals.
Whether it’s providing instant access to paychecks, facilitating last-minute bill payments, or routing government payments to individuals, the system is designed to improve the flow of money through the US economy.
“The Federal Reserve developed the FedNow service to make everyday payments faster and more convenient for years to come,” said Fed Chair Jerome Powell. “Over time, as more banks choose to use this new tool, individuals and businesses will benefit from the fact that an individual can receive a paycheck instantly or a business can access funds instantly when a bill is paid.”
35 early adopters so far, including JPMorgan Chase And Wells Fargotwo of the four largest banks in the US have signed up.
There are another 16 institutions that provide services to banks and credit unions.
The American Bankers Association welcomed FedNow’s developments, noting that the central bank joined the clearing house, which brought its payments service online in 2017, as two major players in the space.
“We will continue to educate our members about the two systems and the benefits they offer to consumers and businesses,” said Rob Nichols, President and CEO of the ABA.
There are still some unanswered questions about FedNow, such as whether banks charge for the service.
The central bank expects the system to be integrated into bank and credit union apps and websites as it evolves.
As FedNow goes online, Fed officials are looking into launching a central bank digital currency, with some saying they believe FedNow could mitigate the need for a CBDC.
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