Instant Payments: FedNow® Launched by Federal Reserve

FedNow Service

On Thursday, the Federal Reserve officially launched its new quick payment system, known as the FedNow® Service. All sizes of financial institutions can sign up to use this service to facilitate instant money transfers for their clients throughout the clock, 365 days a year.

Federal Reserve Chair Jerome H. Powell has said that the FedNow Service was created to facilitate quicker and more convenient everyday payments throughout the coming years. The benefits offered to consumers and businesses will grow as more banks use this new tool, such as the speed with which paychecks can be issued or invoices paid.

FedNow Service rapid payment features are initially available at 35 early adopter financial institutions and the Bureau of the Fiscal Service of the United States Department of the Treasury. Moreover, 16 service providers are prepared to help financial institutions with payment processing.

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When they are entirely accessible, instant payments will have a lot of benefits for both consumers and companies. For example, when you need quick access to funds or when immediate delivery payments help you keep track of your bank account’s cash flow, these benefits will be big. For example, people can get their paychecks right away and apply for them the same day, and startups can better handle cash flows without having to wait for processing. Customers of credit unions and banks that sign up for the service should be able to send instant payments quickly and safely through their financial institution’s mobile app, website, and other platforms in the coming years.

As an interbank payment mechanism, the FedNow Service supports other well-established Federal Reserve payment systems such as Fedwire® and FedACH®. Over the years, the Federal Reserve has eagerly worked with the nation’s more than 9,000 banks and credit unions to promote the widespread accessibility of this service for their consumers.

As FedNow goes online, Fed officials are looking into how to adopt a central bank digital currency (CBDC). Some Fed officials say that FedNow could make a CBDC unnecessary.