Today, the Federal Reserve announced the highly anticipated launch of the FedNow Service—the U.S.’s new instant payment system. FedNow enables participating financial institutions to safely transfer funds within seconds, around the clock, every day of the year—and make funds immediately available to their customers.
Among the initial FedNow participants are 35 banks and credit unions representing a diverse mix of large and small institutions across the country. Other early adopters include the U.S. Department of the Treasury’s Bureau of the Fiscal Service and 16 payment processing service providers that are working to onboard and enable FedNow for more financial institutions. The list of participants will undoubtedly grow in the months ahead.
The Federal Reserve developed the FedNow network to be inclusive and accessible to all 10,000 U.S. banks and credit unions of all sizes, bringing instant payments to businesses and consumers across the country. FedNow, along with The Clearing House’s RTP, will offer payment industry players vast opportunities to innovate and provide new products and solutions as real-time payments become more ubiquitous. Financial institutions that join FedNow can attract and retain customers and remain competitive with new instant payment services.
FedNow is an interbank payment system like ACH and FedWire, and not a consumer-facing service. Unlike Venmo or Zelle, there is no FedNow mobile app. Customers of banks and credit unions that participate on the FedNow network can use their financial institution’s mobile app, website, and other interfaces to send instant payments quickly and securely.
As more financial institutions connect to FedNow and work with service providers to offer innovative solutions, more consumers and businesses will be able to enjoy the benefits of instant payments. For example, shoppers will be able pay for purchases with funds directly from their bank account in real-time, governments will be able to disburse tax refunds instantly, employers will be able pay their staff after each shift, and consumers will be able to make last minute bill payments without incurring late fees. These are only a few examples of potential real-time payments use cases. Today is the beginning of the pivotal transformation that FedNow and instant payments will bring to the U.S. and global payments ecosystem.
Overview by Elisa Tavilla, Director of Debit Advisory Services at Javelin Strategy & Research
