The new real-time payments and settlement service enables the near-instantaneous transfer of funds day, night, weekdays and weekends
Federal Reserve System's headquarters in Washington, DC (Credit AgnosticPreachersKid/Wikipedia.org)
The Federal Reserve System of the US has unveiled plans to develop FedNow Service, a new round-the-clock real-time payment and settlement service to support faster payments in the country.
According to the Federal Reserve, evolving technology is now presenting new opportunities to modernise the payment industry and establish a safe and sufficient foundation for the future.
The US central bank believes that faster payment services have the potential to be widely used, yielding economic benefits for both individuals and businesses by offering the flexibility to manage their money and make time-sensitive payments.
Leveraging Federal Reserve’s reach as a provider of payment and settlement services to more than 10,000 financial institutions, FedNow Service is expected to support a nationwide infrastructure for the development of new payment services.
The new service is expected to be available in 2023 or 2024.
Federal Reserve Board Governor Lael Brainard said: “Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community.
“FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers.”
Public requested for a round-the-clock payments service last year
Last year, the Federal Reserve Board requested comments from the public on the potential services that could be developed to support faster payments. A majority of the comments, as per the apex bank, requested the Federal Reserve to operate a round-the-clock real-time payment and settlement service alongside services provided by the private sector.
At present, the Board is requesting comment on how the new service might be designed to effectively support the full set of payment system stakeholders and functioning of a broader payment system in the country.
Additionally, it is also planning to expand the Fedwire Funds Service and National Settlement Service hours, up to 24/7, 365 days a year, to offer liquidity management in private-sector real-time gross settlement services for faster payments.