‘FedNow’ finally launches officially – but Fed acknowledges it will be a while before it is ‘fully available’

Nearly four years after announcing its intention to launch a round-the-clock payment service, the Federal Reserve Thursday said the day had finally arrived: the FedNow Service, the 24-hour-a-day tool for providing faster payments, is finally live and online.

However, it will likely be a while before most users of the service – especially consumers – will be able to take advantage of the tool before it becomes “fully available.”

In a release, the Fed said that banks and credit unions of all sizes may sign up and use the service, which is designed to allow bank customers and credit union members to “instantly transfer money,” any time of the day, on any day of the year.

However, as of Thursday, only 35 banks and credit unions (out of about 9,000 nationwide) are signed up for the service and ready to provide instant payments. Also signed up, the Fed said, are the Treasury’s Bureau of the Fiscal Service (which provides financing for the federal government, tracks the public debt, and offers central payment services to the public on behalf of federal agencies, among other things) and 16 service providers to support payment processing for banks and credit unions.

In a statement issued Thursday, Federal Reserve Board Chair Jerome H. (“Jay”) Powell indicated that the sweet spot of the tool’s usage is not immediately, but years ahead.

“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” said Federal Reserve Chair Jerome H. Powell. “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 said that when FedNow is “fully available,” instant payments will provide rapid access to funds and/or just-in-time payments help manage cash flows in bank accounts.

“For example, individuals can instantly receive their paychecks and use them the same day, and small businesses can more efficiently manage cash flows without processing delays,” the Fed asserted.

The agency predicted that in years ahead, bank customers and credit union members should be able to use their financial institution’s mobile app, website, and other interfaces to send instant payments quickly and securely.

The agency did indicate it is committed to working with banks and credit unions – “over time” – to support the widespread availability of this service for their customers and members.

In August, 2019, the Fed announced it was pursuing the new service; it also opened a 90-day comment period about how “the new service might be designed to most effectively support the full set of payment system stakeholders and the functioning of the broader U.S. payment system.”

The Fed pointed out in 2019 that in advance of its announcement, it requested public comment on potential services that it could develop to support faster payments. It said that of the more than 350 comments it received about developing a new service for faster payments, more than 90% supported the Fed operating a round-the-clock, real-time payment and settlement service alongside services provided by the private sector.

Federal Reserve announces that its new system for instant payments, the FedNow® Service, is now live