FedNow is an

instant payment Instant payment (sometimes referred to as real-time payment or faster payment) is a method of electronic funds transfer, allowing for almost immediate transfer of money between bank accounts. This was in contrast to the previous transfer times o ...

service developed by the

Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of ...

for

financial institution A financial institution, sometimes called a banking institution, is a business entity that provides service as an intermediary for different types of financial monetary transactions. Broadly speaking, there are three major types of financial ins ...

s in the United States, which allows individuals and businesses to send and receive money. The service launched on July 20, 2023. Financial institutions are able to build products on top of the FedNow platform. By 2025, over a thousand financial institutions were live on the service.

Operation

The FedNow Service began formal certification of participants in April 2023 and formally launched in July 2023. It operates on a 24-hour, 365-days-a-year basis, as opposed to the older

FedACH FedACH is the Federal Reserve Banks' automated clearing house (ACH) service. In 2007, FedACH processed about 37 million transactions per day with an average aggregate value of about $58 billion. For comparison, Fedwire processed about 537,000 tran ...

system that is closed on weekends and

holidays A holiday is a day or other period of time set aside for festivals or recreation. ''Public holidays'' are set by public authorities and vary by state or region. Religious holidays are set by religious organisations for their members and are often ...

. FedNow charges financial institutions a

transaction cost In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market. The idea that transactions form the basis of economic thinking was introduced by the institutional economist John R. Commons in 1 ...

of $0.043 per transaction. The FedNow Service is one of many

services that have been developed around the world to offer immediate or close-to-immediate interbank transfers of money. The Federal Reserve maintains a list of all financial institutions and

fintech Financial technology (abbreviated as fintech) refers to the application of innovative technologies to products and services in the financial industry. This broad term encompasses a wide array of technological advancements in financial services, ...

vendors that are certified and have live Send and/or Receive capabilities on the service.

History

A private entity, The Clearing House Payments Company, launched Real Time Payments (RTP) in 2017. RTP is an instant payment system for all US financial institutions, owned by a group of large US banks. In 2020, Lael Brainard announced the upcoming FedNow service would provide "a neutral platform on which the private sector can build to offer safe, efficient instant payment services to users across the country", after 2018 the

European Central Bank The European Central Bank (ECB) is the central component of the Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's Big Four (banking)#International ...

launched the TIPS instant payment settlement system. In the lead up to its release scheduled for July 2023,

Moody's Investor Service Moody's Ratings, previously and still legally known as Moody's Investors Service and often referred to as Moody's, is the bond credit rating business of Moody's Corporation, representing the company's traditional line of business and its histori ...

released a report stating the service would likely lead to gains for households and businesses, giving them lower-cost methods of moving their money. But it also noted incumbents in the payments space could see revenue declines, those participating could be forced to make upgrades in technology and staff, and there was a greater possibility of

bank run A bank run or run on the bank occurs when many Client (business), clients withdraw their money from a bank, because they believe Bank failure, the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking sys ...

s, even with potential benefits like lower costs and more efficiency in the payments ecosystem.

References

External links

* {{Cite web , title=About the FedNow Service , url=https://www.frbservices.org/financial-services/fednow/about.html , access-date=2022-09-23 , website=FRBservices.org , language=en Federal Reserve System 2023 establishments in the United States Payment systems Banking technology

Operation

History

See also

References

External links