US Introduces Immediate Payment of Customer Funds to Banks

WASHINGTON, DC: As part of an effort to modernize the US payments system, the US Federal Reserve has announced the launch of a service that will allow Americans to send and receive funds instantly 24/7.

First developed in 2019, the FedNow service eliminates multi-day delays in clearing cash transfers, bringing the US in line with countries where instant money transfer services have existed for years, such as the UK and European Union countries.

FedNow has launched partnerships with 41 banks and 15 service providers, including community banks and major financial institutions such as JPMorgan Chase, New York Mellon Bank and US Bancorp, and the Fed plans to bring more banks and credit unions on board this year.

According to the Fed, 35 banks and credit unions are now using the service, as well as the Treasury Department’s Office of Fiscal Affairs.

The service competes with private sector real-time payment systems, including The Clearing House’s RTP network, and was initially opposed by major banks.

However, many companies decided to participate because they believed FedNow would enable them to better serve their customers.

“For us, FedNow is really a great way to expand our reach,” said Anu Somani, head of global accounts payable and embedded payments at US Bank, reported by Reuters.

Payments made through FedNow are settled directly into your central bank account. This is in contrast to payment services like Venmo and PayPal, which act as intermediaries between banks.

The FedNow service is free to consumers, but participating banks have not confirmed whether they will charge for the service.

Democratic Senator Chris Van Hollen, who previously called on the Fed to develop a real-time payments system, said in a statement that the launch of FedNow was “good news for American consumers and the economy.”

FedNow has a $500,000 payout limit, but banks can choose to lower that limit.