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Federal Reserve Launches Instant Payments, Modernizes System

July 27, 2023 | By Kali Girl

According to Reuters, the U.S. Federal Reserve has unveiled the highly anticipated “FedNow” service, aimed at modernizing the country’s payment system. The new service will enable everyday Americans to conduct fund transfers in mere seconds, 24/7, eliminating the customary several-day lag.

“FedNow” brings the United States in line with other leading nations like the UK, India, Brazil, and the European Union, where similar services have been in operation for years.

FedNow is set to launch with a network of 41 banks and 15 certified service providers. Participants include JPMorgan Chase, Bank of New York Mellon, and US Bancorp, among others. The service caters to both community banks and large lenders.

According to USA Today, “The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” Fed Chair Jerome Powell said in a news 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.”

FedNow, a real-time payments system launched by the Federal Reserve, sets itself apart from services like Venmo and PayPal by directly settling transactions in central bank accounts, bypassing intermediaries. Consumers won’t be charged for using FedNow, but questions remain about how participating banks will handle associated costs.

Democratic Senator Chris Van Hollen, a proponent of such a system, expressed satisfaction with the FedNow’s launch stating this is “good news for American consumers and our economy.”

“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,” he said.

The Federal Reserve has expressed its intention to bring more banks and credit unions onboard this year. As of now, 35 banks and credit unions, along with the Treasury Department’s Bureau of Fiscal Service, are already utilizing FedNow.

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