The debut of an instant payment service that is due to be introduced in the summer of 2023 was announced by the Federal Reserve on Monday. According to a description from the central bank, FedNow, which it has been building for the last few years, is meant as a “flexible, neutral platform that allows a broad variety of rapid payments” so that customers can instantly transmit money through their financial institutions. Lael Brainard, vice chair of the Federal Reserve, stated that FedNow will “change the way routine payments are done throughout the economy” during a speech to developers.
As The Daily Wire reports:
“Immediate availability of funds could be especially important for households managing their finances paycheck to paycheck or small businesses with cash flow constraints,” she explained. “Having the capacity to manage money in real time could help households avoid costly late payment fees or free up working capital for small businesses to finance growth.”
Among other examples, FedNow is set to eliminate merchants’ need to wait one to three days before payments are finished depositing, as well as the need for workers to wait days before receiving paychecks. Retailers currently pay an average interchange fee of $0.23 when consumers use debit cards, according to data from the Federal Reserve, which FedNow hopes to significantly undercut.
“Americans rely on the payment system all day every day to make purchases, pay bills, and get paid — without ever needing to consider the complex infrastructure that is operating under the hood,” Brainard added. “American households and businesses want and deserve payment transactions that work seamlessly, reliably, and efficiently.”The move comes as the central bank also considers the creation of a “central bank digital currency” (CBDC) that would work as an alternative to other digital assets — including cryptocurrencies, which are virtual coins protected from counterfeiting via encryption, and stablecoins, which attempt to peg themselves to another asset such as gold or the dollar. Federal Reserve Chair Jerome Powell told lawmakers last year that he had no desire to hasten the project.