The Federal Reserve said on Wednesday that FedNow, its eagerly anticipated fast payment tool, will be live in July.
With the ability to enable consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank transactions, the instant payment network will settle payments in a matter of seconds.
Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program’s executive sponsor, claimed that the Federal Reserve is building a cutting-edge payments system that is durable, adaptable, and accessible with the FedNow Service.
“The launch reflects an important step in the process to help financial institutions better support almost every sector of our economy by serving customer needs for instant payments.”
The U.S. Treasury and a variety of banks of all sizes, including the biggest processors, are on board, according to the Fed. Prior to the program’s launch, the central bank is still in contact with financial institutions and service providers to test it.
Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow programme executive, said, “With the launch approaching, we urge financial institutions and their industry partners to proceed full steam ahead with preparations to join the FedNow Service.
Montgomery pointed out that the service’s availability is just the start, and expanding the network of collaborating financial institutions would be crucial to boosting the accessibility of fast payments for customers and businesses nationwide.
The Fed will start formally certifying banks to implement the service starting the first week of April. To get ready for sending live transactions through the system, early adopters must first complete client testing, guided by input from the FedNow Pilot Programme.
The Fed contends that by eliminating late payment penalties and freeing up working capital to fuel expansion, having money immediately available will benefit Americans living paycheck to paycheck or small firms with cash flow issues.
According to analysts, since consumers won’t have to wait for a cheque to clear, FedNow could reduce the demand for payday loans. Businesses may benefit from paying suppliers more promptly and may adopt it as a less expensive and more secure method of accepting customer payments.
FedNow, which would let customers and businesses transmit payments instantaneously, may have some of the same advantages as a central bank digital currency, according to Fed Governor Michelle Bowman’s comments from a year ago.