FedNow is the Fed’s new real-time payments service that launched July 20. FedNow is the first government-created system for financial institutions to send and receive funds almost instantly. Ideally, FedNow would ensure you’d no longer have to wait a few business days, or bide your time over holidays or weekends, to receive your money.
This means you can make payments—your mortgage, for example—within seconds. You could opt to send funds on the due date rather than having to plan several days out for an online payment to clear, or up to a week for a check to be processed.
For business owners, too, this means faster and smoother operations. They can send and receive invoice payments, for instance, in real time online.
It can take days to transfer money or make payments from your bank account, even as apps like Venmo, Cash App and Zelle make such transactions nearly instant. That’s because the federal government has no digital payments system for the entire banking system to utilize in real time—until now. The Federal Reserve has launched its own real-time payments system, called the FedNow Service (FedNow), as of July 20. Though FedNow is years behind tech-based private-sector competitors, it will be a game changer for transactions in the U.S. It is the first—and only—digital instant-payments system that is both created and backed by the government. As a result, many banks will see it as a larger, safer system able to transfer money faster for consumers and businesses. FedNow “will help make everyday payments over the coming years faster and more convenient,” said Federal Reserve Chair Jerome Powell in the soft-launch announcement on July 20. “As more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.” Some experts are concerned that fraud and theft can occur, with so much data at hand. Others are concerned about the government's overreach into the public's privacy. Banks and financial institutions are worried that Fed Now will cut into their profits from traditional money transfer and wire transfer services they have offered for many years. July 20 was a soft launch for Fed Now and only time will tell how it will help, and possibly put at risk, the users of the Fed Now system. Ask us how FedNow may affect your company procedures. Credits to NerdWallet.com