Fed launches long-awaited instant payment service and modernizes its systems

The Federal Reserve The United States announced on Thursday the launch of a long-awaited service that will aim to modernize the country’s payment system by allowing ordinary citizens to send and receive funds in seconds, 24 hours a day, seven days a week.

The service “FedNow”, which it has been working on since 2019, will try to eliminate the delay of several days that cash transfers usually take to settle, which will put the United States on a par with countries such as the United Kingdom, India, Brazil, as well as the European Union, where similar services have existed for years.

FedNow launches with 41 banks and 15 service providers certified to use the service, including community entities and large lenders like JPMorgan Chase, Bank of New York Mellon and U.S. Bancorpbut more banks and credit unions are expected to join this year.

The Fed said in a statement Thursday that 35 banks and credit unions currently use the service, as well as the Treasury Department’s Office of Fiscal Services.

The service will compete with private sector real-time payment systems, including The Clearing House’s RTP network, and initially faced opposition from big banks, who saw it as redundant. However, many have agreed to participate because FedNow It will allow them to expand the services they can offer to their customers.

“For us, FedNow It’s a wonderful way to broaden our reach.“, said Anu Somanihead of global and integrated payments for US Bank.

Unlike peer-to-peer payment services like Venmo or PayPal, which act as intermediaries between banks, payments made through FedNow will be settled directly into the central bank accounts.

The Fed also has a real-time payment system called FedWire, but it is reserved for large-scale payments, mainly companies, and it only works during business hours. Although the new system FedNow is for everyone, it is likely to benefit consumers and small businesses most, analysts say.

Source: Reuters