FedNow instant payment service for banks in the United States goes live

FedNow Instant Payment Service For Banks In The United States Goes Live

NEW YORK — The US Federal Reserve on Thursday launched FedNow, a new instant payment service that allows banks and credit unions to sign up to send payments in real time so their customers have a faster way to send money between banks.

FedNow, which was first announced in 2019, published a list of banks and credit unions already signed up to offer its service. However, it may take longer for customers to be able to use the service with their bank.

Here’s what to know about FedNow:

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How does FedNow work?

FedNow offers the instant payment service to banks and credit unions so they can transfer money from their customers.

Unlike other private money transfer services like PayPal or Venmo, the FedNow service will not be offered directly to customers through a third-party app or website. It will only be available through banks or credit unions, though once they adopt FedNow, those institutions will likely make it available on their websites and apps.

Once a bank offers FedNow services, customers will be able to send money instantly. The service is also available 24 hours a day, seven days a week.

Among the banks that will soon offer FedNow services are Wells Fargo and JPMorgan Chase.

Why did the Federal Reserve create FedNow?

By creating FedNow, the Fed is making it faster and easier for people to send and receive payments online. With FedNow, the Fed is also catching up with other countries that already have real-time payment systems, including England, China, Sweden and India.

FedNow also provides banks with tools to identify and combat fraud attempts. Those tools include the ability for banks to identify suspicious accounts and limit the number and frequency of payments on those accounts.

Who can use FedNow?

Customers—both individuals and businesses whose banks or credit unions offer FedNow services—will be able to send and receive money in real time. For example, if a customer wants to send money to a friend, they must both have bank accounts at institutions that offer FedNow services.

What are some situations in which I can use FedNow?

Given the speed of transactions, this service can benefit clients in many ways. These are some examples:

If your employer sends your paycheck using FedNow, the check will post to your account in seconds, not days. If you forgot to pay your rent until the last minute, you can send the money late at night without waiting for the payment to reflect the next business day. When will FedNow be available to me?

FedNow is already live, but it could take months or years for customers to be able to use this service. It all depends on your bank providing it.

Will my privacy be protected with FedNow?

The Federal Reserve and the FedNow service cannot access any customer’s bank accounts and have no authority to conduct additional surveillance, according to Fed officials.

Will FedNow replace Venmo, PayPal and other services?

There are key differences between the FedNow service and apps like Venmo and PayPal. FedNow is a service offered directly to banks, not to customers, which means that FedNow does not have an app or website from which customers can send money, including each other.

What is the difference between FedNow and Zelle?

While both FedNow and Zelle allow customers to transact online, there are also key differences. Zelle is a private app that works with some financial institutions, while FedNow is backed by the Federal Reserve and designed for adoption by most banks across the country.

Zelle allows you to send and receive money instantly, but the money may not be available to customers until days after the transaction. With FedNow, the Fed ensures that money will be available in seconds. Zelle has a direct-to-customer platform that allows you to send money through its app, while FedNow will not interact directly with customers, offering its services to banks.

Will FedNow replace cash?

Fed officials have stressed that FedNow has nothing to do with the notion of a government-run digital currency. It has been falsely claimed on social media that its use will lead to the removal of cash.

“The Federal Reserve has not made any decisions on the issuance of a Central Bank Digital Currency (CBDC) and would not do so without the strong support of Congress and the Executive Branch, ideally through specific legislation authorizing it,” the agency wrote in a series of tweets in April. “A CBDC would not replace cash or other payment options.”

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