- FED announces the official launch of its long-awaited instant payment system.
- FedNow launches with 41 banks certified to use the new system, including JPMorgan.
- The tool works 24 hours a day, 7 days a week.
- It is not based on Blockchain nor is it a CBDC.
Support us with crypto to keep our newspaper alive
The United States Federal Reserve (FED), the country’s central bank, has officially launched its highly anticipated new instant payment system, FedNow.
The monetary authority announced the launch this Thursday in a press release, informing that the system is now available for US banks and credit unions to register and use the tool for immediate money transfer, 24 hours a day, 7 days a week.
First announced in 2019, FedNow is an effort to modernize the American payment system and one that promises to eventually make it possible to send and receive money in seconds.
The new service is launching with 41 banks certified for use, including community banks and large lenders like JPMorgan Chase, Bank of New York Mellon, and US Bancorp, and 16 service providers that are ready to support payment processing. Although the Fed hopes to incorporate more institutions this year.
According to the release, 35 banks and credit unions are currently using the service, as well as the US Treasury Department’s Office of Fiscal Services.
“The Federal Reserve created the FedNow Service to help make everyday payments for years to come faster and more convenient,” Fed Chairman Jerome H. Powell said in the note.
Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include allowing an individual to receive a paycheck immediately, or allowing a business to instantly access funds when a bill is paid.
FedNow: immediate payments at any time
Currently, checks, debit card processing and other payments can take up to a few days to clear while the banks of the sender and receiver of the money communicate and verify that the funds are available.
FedNow addresses this by providing real-time, round-the-clock, uninterrupted money gross settlement and clearing services to help banks and other institutions move money more expeditiously.
Although it should be noted that the system refers specifically to a network or a ” high-speed highway “, as the FED calls it, available for banks to process payments more expeditiously. To make a payment, both the sender and receiver must have accounts at banks that are part of the network.
Unlike payment services like Venmo and PayPal, which act as intermediaries between banks, payments made via FedNow will settle directly to central bank accounts, as detailed by Reuters. FedNow will not charge consumers, though it is unclear if or how participating banks will pass on the costs associated with the service.
The US central bank already operates another real-time payments system called FedWire, but it’s reserved for large-scale, mostly corporate payments, and is only operational during business hours, according to Reuters. The new FedNow system, on the other hand, is designed for everyone and is operational all day; although analysts estimate that it is likely to benefit consumers and small businesses the most.
It is not CBDC nor is it based on the Blockchain
The Fed has clarified that its new system is not a central bank digital currency (CBDC), nor is it based on the Blockchain technology underlying cryptocurrencies.
Observers within the cryptocurrency space appear to be mixed on the new Fed system, with some suggesting that this could be a precursor to CBDCs, while others argue that such a tool could replace or make digital currencies, including stablecoins and CBDCs, unnecessary.
The start-up of FedNow occurs in line with the schedule established by the authority in March.
