December 11, 2023

Federal Reserve Building in Washington, D.C.

Win McNamee | Reuters

The Federal Reserve launched its FedNow instant payments service on Thursday, following years of development of a system that officials say will allow businesses and individuals to move cash more quickly.

Whether providing instant paychecks, allowing last-minute bill payments or sending government payments to individuals, the system promises to improve the flow of money in the U.S. economy.

“The Federal Reserve built the FedNow service to help make everyday payments faster and more convenient for years to come,” said Federal Reserve Chairman Jerome Powell. “Over time, as more banks choose to use this new tool, the benefits for individuals and businesses will include enabling individuals to receive their paychecks immediately, or companies to receive funds instantly when an invoice is paid.”

35 early adopters so far, including JPMorgan and FuGuo banktwo of the four largest U.S. banks, registered.

An additional 16 agencies serve banks and credit unions.

The American Bankers Association welcomed the growth of FedNow, noting that the Federal Reserve has joined the clearing house, which brought payments services online in 2017, as two major providers in the space.

“We will continue to educate our members about these two systems and the benefits they provide to consumers and businesses,” said ABA President and CEO Rob Nichols.

There are still some unanswered questions about FedNow, such as whether banks will charge for the service.

The central bank expects that as the system is further developed, it will be integrated into apps and websites of banks and credit unions.

With FedNow going live, Fed officials are looking into the implementation of a central bank digital currency, with some saying they believe FedNow could alleviate the need for a CBDC.