The Fed Officially Jumps into Real-Time Payments
Last week, we told readers that Federal Reserve (Fed) Chairman Jerome Powell was “seriously considering” a real-time payments system. A week later, the Fed officially announced that it would begin developing a “round-the-clock real-time payment and settlement service.”
The new service, called FedNow Service would allow near-instantaneous fund transfers, and is expected to be finalized in 2023 or 2024.
“Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community,” said Federal Reserve Board Governor Lael Brainard. “FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers.”
The new service has been heavily criticized by big banks, who developed their own real-time payment services through the Clearing House back in 2017. However, many of the nation’s smaller banks and credit unions have not used the private sector option, hoping that the Federal Reserve would develop its own service.
Chairman Powell has stated that it is important that FedNow Service be available to all banks and credit unions and that it be interoperable with the existing private sector option. The Fed is seeking comments from interested stakeholders for 90 days once the notice is published in the Federal Register.