The Federal Reserve announced that their long-awaited instant pay service, FedNow, will launch this summer.
The network will give users the ability to pay in seconds and support a variety of payments, including consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank.
“With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible,” said Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program’s executive sponsor. “The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy.”
The Reserve says that the country’s leading banks are on board for the service, and transactions are already being tested. “With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive. Montgomery also explained that availability is only the first step to implementing FedNow. Growing the number of participating financial institutions is a crucial component to making instant payments accessible to consumers and businesses across the country.
This week, the Fed began certifying banks to take part in the service via the FedNow Pilot Program. “The Fed maintains making funds immediately available will help Americans living paycheck to paycheck or small businesses with cash flow constraints by avoiding late payment fees and freeing up working capital to finance growth”, according to Yahoo News.
Analysts say FedNow could also help weaken the need for payday loans as citizens won’t have to wait for a check to clear. For businesses, there is also an upside for better-paying suppliers on time, and businesses could embrace it as a less costly, and more certain, way to accept payments.