#498
[Fed]Now We’re Talking
Published:
Jul 24, 2023
Author:
Sarah Parsons Wolter
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FedNow, the Federal Reserve’s new system for instant payments, finally launched this week. Participants in the launch include 35 banks and credit unions, the U.S. Department of the Treasury's Bureau of the Fiscal Service, and 15 service providers like FIS and Jack Henry.
Initially conceptualized by the Fed in 2013, FedNow allows businesses and consumers to send and receive money 24/7, and early use cases are likely to include instant access to paychecks and invoice payments as well as instant bill pay.
Sounds great, right? While FedNow promises to improve liquidity and reduce friction, a rapid increase in the velocity and volume of digital payments does not come without risk. When payments are processed in a matter of seconds, it is difficult to identify and stop fraudulent transactions. Once fraudulent payments have been completed, it is even more difficult to recover the funds.
Plenty of questions remain. Will risk and compliance procedures keep pace? What will it cost? Will we see widespread adoption? And will Barbie and Ken turn out to be a couple of criminal masterminds behind a massive FedNow attack?
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[Fed]Now We’re Talking
Fed launches long-awaited instant payments service, modernizing system - The "FedNow" service will seek to eliminate the several-day lag it commonly takes cash transfers to settle, bringing the U.S. in line with countries including the UK, India, Brazil, as well as the EU, where similar services have existed for years. Unlike peer-to-peer payments services like Venmo or PayPal, which act as intermediaries between banks, payments made via FedNow will settle directly in central bank accounts. Read more
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