FedNow

FedNow is a service developed by the Federal Reserve for depository institutions in the United States. It will enable individuals and businesses to send and receive instant payments.[1][2][3][4] Banks will be able to build products on top of the FedNow platform.[5]

FedNow is scheduled to begin formal certification of participants of the program in April 2023, with a formal launch planned for July 2023.[6][7] It will operate on a 24-hour, 365-days-a-year basis,[8] as opposed to the U.S. government's current system that is closed on weekends and holidays.[9][10] FedNow's transaction costs are expected to be about one-fifth the cost of existing payment solutions, which cost merchants an average of $0.23 per transaction.[5]

In 2017, The Clearing House Payments Company, a private entity owned by an association of large US banks introduced RTP – Real Time Payments, a similar instant payments system which is also available to all US financial institutions.[11] In the late 2010s, the association of large banks unsuccessfully lobbied the government to prevent the Federal Reserve from developing the competing FedNow service, while smaller banks and financial technology companies encouraged the Fed to proceed with FedNow's development.[12]

Instant payments address most of the problems that a central bank digital currency (CBDC) would solve.[13][14] However, FedNow is not a CBDC, because it is not a liability of the Federal government.[15][5]

See also

References
  1. "Federal Reserve Board - FedNow Service". Board of Governors of the Federal Reserve System. 2022-09-02. Retrieved 2022-09-23.
  2. "Analysis | The Fed's Messaging Needs an Upgrade". Editorial. Washington Post. 2022-09-01. ISSN 0190-8286. Retrieved 2022-11-21.
  3. Duncan, Hannah (2022-10-14). "Fed(up)Now? Instant payments in the US finally on their way". The Banker. Retrieved 2022-11-21.
  4. Smialek, Jeanna (2019-08-05). "Fed Wants Workers to Get Pay Faster". New York Times.
  5. Dale, Brady (2022-08-29). "The Fed gives a timeline for FedNow, its payments platform". Axios. Retrieved 2022-11-21.
  6. Campbell, Kyle (2022-11-03). "Fed sets prices that banks will pay for FedNow". American Banker. Retrieved 2022-11-21.
  7. "Federal Reserve announces July launch for the FedNow Service". Board of Governors of the Federal Reserve System. 2023-03-15. Archived from the original on 2023-03-16. Retrieved 2023-03-17.
  8. George, Esther L. (2020-12-18). "From Then to FedNow: Payments Innovation and the Federal Reserve". Policy Perspectives (December): 1–3.
  9. Barnett, Keith J.; Lui-Kwan, Kalama M.; Ostroff, Ethan G.; McCrory, Carlin A. (2022-09-06). "FedNow Set for 2023 Summer Launch". Lexology. Retrieved 2022-11-21.
  10. Neal, Michelle (2022-11-04). "Advances in Digital Currency Experimentation". Federal Reserve Bank of New York. Retrieved 2022-11-21.
  11. "Real-Time Payments for All Financial Institutions". Retrieved 30 April 2023.
  12. Clozel, Lalita (4 August 2019). "Banks Confront Fed on Faster Financial Payments". The Wall Street Journal. Retrieved 9 May 2023.
  13. DiCamillo, Nate (2022-01-25). "The Fed's CBDC report was lame on purpose". Quartz. Retrieved 2022-11-21.
  14. Heltman, John (2019-11-25). "FedNow is necessary, Fed digital currency is not: Mester". American Banker. Retrieved 2022-11-21.
  15. Dale, Brady (2022-09-16). "The Feds want dollars to move much faster". Axios. Retrieved 2022-11-21.
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