In what could prove to be a landmark moment for the US payments ecosystem, the Federal Reserve has finally launched the FedNow payments rail.
The instant payment rail will aim to make transactions faster and more efficient than ever for businesses and consumers, ultimately providing a more seamless payment experience than ever before.
FedNow will look to provide instant access to paychecks, eliminating the drawn out process to clear them as well as allowing users to make last minute or government payments to enhance the flow of money in the US.
Federal Reserve Chairman, Jerome Powell, commented on the successful launch, stating: “The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient.
“Over time, 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.”
The Fed has announced that 35 institutions have already adopted FedNow, including JP Morgan Chase, Wells Fargo and US Bank, with an additional 16 entities signing up to provide services for various banks and credit unions.
The launch of FedNow has supposedly been a long time coming as the Federal Reserve looked to build upon the Real-Time Payment (RTP) rail it launched to enhance the speed of US payments.
The US central bank will now explore options to further develop the payment rail as it continues its roll-out process to be integrated in apps and websites of banks.
During a Trustly webinar earlier this year, Eric Foust, VP of Banking Partnerships North America at Trustly, spoke alongside guests to discuss the impact the FedNow rail will have on the wider US payments landscape.
He said: “FedNow is the complement to RTP for many financial institutions out there who decided to not connect into the RTP network for a whole litany of reasons. Those reasons can vary from business models, or feel more safe with the Fed owning the payment rail.”
“I think FedNow is going to increase the number of financial institutions that are able to support real-time, 24/7 payments here in the US. I don’t expect either payment rail to have complete ubiquity like ACH, so it’s going to be up to entities to develop intelligent routing systems.”
