Federal Reserve starts new instant payment system

Clyde Hughes
·2 min read
UPI
Federal Reserve Board Chairman Jerome Powell testifies before the House Financial Services Committee on June 21. He lauded the new instant payment system on Thursday. Photo by Ken Cedeno/UPI

July 20 (UPI) -- The Federal Reserve said Thursday that its new system for instant payments to financial institutions has gone live.

The Fed said that banks and credit unions can start signing up for the system, called the FedNow Service, which will allow for instant money transfers for customers at any time of the day.

"The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient," Federal Reserve Chair Jerome Powell said in a statement.

"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."

FedNow Services will allow customers and businesses to have rapid access to cash and will allow banks to more swiftly manage cash flows. It will allow businesses to issue instant paychecks to individuals on the same day while small businesses will be able to process payments quickly, the Federal Reserve said.

In the coming years, the system will be available on their financial institution's mobile apps and websites.

"[The Independent Community Bankers of America] has been a constant advocate for the development of the FedNow Service, and today's announcement by the Federal Reserve marks a crucial milestone for payments transformation," ICBA President and CEO Rebeca Romero Rainey said in a statement.

The organization said FedNow will be a boon for smaller community banks, allowing them to instantly clear settlements and requests for payment regardless of staffing or amounts.

"With the market for faster payments growing rapidly, FedNow marks a significant opportunity for community banks to adopt faster payments products and services as they continue to evolve their strategies and solutions to best serve their customers -- all while offering the personalized approach to banking for which they are known."