On Thursday, the U.S. Federal Reserve announced the much-anticipated “FedNow” service to modernize the country’s payment system is live. The service will eventually enable Americans to send and receive funds within seconds, 24/7.
Federal Reserve Chair Jerome Powell stated that the FedNow Service aims to make payments more efficient for individuals and businesses.
“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” Powell said in a release. “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.”
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The launch of FedNow brings the U.S. on par with other countries such as the UK, India, Brazil and the European Union, which have had similar systems for years. At launch, 41 banks and 15 service providers, including community banks and major lenders like JPMorgan Chase, Bank of New York Mellon and US Bancorp, are certified to use FedNow, Reuters reported.
FedNow has been in the works for nearly four years. CFOTO/Future Publishing | Getty Images
The Fed also announced that 35 early adopter banks and credit unions, along with the U.S. Department of the Treasury’s Bureau of the Fiscal Service, are equipped with instant payment capabilities through the FedNow Service.
FedNow has been in the works since 2019, and it aims to eliminate the common several-day delay in cash transfers. Unlike peer-to-peer payment services like Venmo or PayPal, FedNow will allow payments to settle directly in central bank accounts, eliminating the need for intermediaries between banks.
“The launch of FedNow will help connect Americans with their money — when they need it, immediately, in real-time — and will save consumers billions of dollars annually,” Senator Chris Van Hollen said in a statement on Thursday.