In a announcement On Thursday morning, the Federal Reserve announced that its instant payment system, the FedNow® service, was officially online. This tool aims to empower banks and credit unions of all sizes to facilitate instant money transfers for their customers. The Federal Reserve says FedNow transactions can be executed 24 hours a day, 7 days a week, 365 days a year.
For starters, 35 banks and credit unions, alongside the US Treasury Department’s Office of Tax Services, are among those already equipped to handle payments through the FedNow service. In addition, a range of 16 service providers are set to offer payment processing support to banks and credit unions.
“The Federal Reserve has created the FedNow service to help make everyday payments over the next few years faster and easier,” said Federal Reserve Chairman Jerome Powell. “Over time, as more banks choose to use this new tool, the benefits for individuals and businesses will include the ability for an individual to immediately receive a paycheck, or for a business to instantly access funds when a bill is paid.”
When asked if the FedNow service was attempting to replace cash and whether or not it was a central bank digital currency (CBDC), the Federal Reservedeclared “No. The FedNow service is not tied to any digital currency. The FedNow service is a payment service that the Federal Reserve makes available to banks and credit unions to transfer funds to their customers. It is like other Federal Reserve payment services, such as Fedwire and FedACH. The FedNow service is neither a form of currency nor a step toward eliminating all forms of payment, including cash.”