The Federal Reserve (Fed) has officially launched its new instant payment service, FedNow, which aims to modernize the U.S.’s payment system. As previously discussed here and here, consumers and businesses will be able to send and receive money within seconds, at any time of the day and on any day of the year. This will eliminate the one to three days’ lag time of traditional money transfers, providing the public with more flexibility in managing their money.
There are 35 early adopter banks and credit unions, with the idea being that FedNow will eventually be adopted by the majority of banks and credit unions in the U.S. Financial institutions will provide their customers with access to the instant payments through new features on their mobile apps and banking websites. FedNow will not have an app or website of its own for customers to utilize.
Per the Fed, the first release of the FedNow Service provides optional features, including fraud prevention tools, the ability to join initially as a receive-only participant, request for payment capability, and tools to support participants in their handling of payment inquiries.
The initial rollout is expected to include features to help manage fraud risk and mitigate fraud losses, including tools for the financial institutions to investigate erroneous or suspected fraudulent transactions. Consumers will be able to reject payments to and from accounts they have designated as suspicious and to put limits on the amount of the transaction. Additional features and service enhancements are expected to be introduced over time.
Fed officials have stated that the FedNow Service is not related to a government-run digital currency, nor is it a step toward eliminating cash. We will monitor the roll-out of the service and any reported issues.