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IPFS News Link • Federal Reserve

Fed Announces Launch Of 'FedNow' Real-Time Payment System, Sparking Debate

• by Tom Ozimek

The Fed announced on Wednesday that it will begin formal certification of participants in the FedNow system in April in anticipation of a July launch.

First announced in 2019, FedNow will allow banks to instantly transfer payments across the financial system.

"With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service," Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, said in a statement.

As banks and other financial institutions join the program, this will create a growing network with clearing and settlement features that lets businesses and individuals send and receive instant payments at any time of day.

Recipients using the system will have full access to funds immediately, making it easier to make time-sensitive payments.

Some analysts have said that FedNow could reduce demand for payday loans because customers who use the system would receive their pay immediately, without having to wait for checks to clear.

"The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy," Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program's executive sponsor, said in a statement.

The system will have the capacity to support various types of transactions: consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank.