FedNow will modernise the payment rails in America
The Federal Reserve has launched a new system for instant payments, aptly called FedNow.
Banks and credit unions of any size can sign up to the service to enable them to instantly transfer money for their customers at any time.
The service will allow consumers and businesses to manage their cash flows better, and individuals to access their paycheck right away.
Customers of financial institutions that have signed up for the service, will be able to use their bank’s app or website to send instant payments.
So far, 35 financial service providers have got on board, including BNY Mellon, JP Morgan Chase and Wells Fargo.
In addition to this, 16 service providers have signed up to support payment processing for financial institutions, such as Finastra, FIS and Temenos.
The Fed said it is committed to working with the more than 9,000 banks and credit unions in the US to support the widespread use of the service.
It first announced that it would develop a “round the clock” payment and settlement service in 2019, to modernise the nation’s payment system.
There are also hundreds of fintechs which operate through banks, that will be able to launch or improve products by routing transactions through FedNow.
Jerome H. Powell, chair of the Federal Reserve, commented on the launch: “The Federal Reserve built the FedNow service to help make everyday payments over the coming years faster and more convenient.
“Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.”
As an interbank payment system, the FedNow service operates alongside other Federal Reserve payment services, such as Fedwire and FedaACH.