Updated: Jul 20, 2023, 11:24am
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.”
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