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  • Frank Tian

💵 Fast Payment Update

FedNow to Come Next Summer


What is FedNow

FedNow is the instant payment service developed by the Federal Reserve for 10,000+ financial institutions in the US. It enables real-time payment 24x7x365.


FedNow was announced in 2020. Currently, 120+ organizations are participating in the pilot.


In late August, a more detailed timeline is out: FedNow is to be launched in May-July 2023.


Why FedNow


🟩 The Demand


Both businesses and consumers could use real-time payment/settlement to better manage their finance. With today’s technology, there is no excuse not to provide such a service.


Payment on the blockchain is an experiment. Native crypto, stablecoin, and CBDC have various degrees of failure/success. However, the demand for fast payment, anytime, anywhere is loud and clear.


🟩 The Resilience


There is already a fast payment solution from the private sector: large banks launched RTP (Real-Time Payment) Network in 2017 via The Clearing House.


However, from a systematic risk perspective, it is always good to have dual services for the critical payment infrastructure.


FedNow offers the smaller financial institutions a choice, who are hesitant to join the RTP.


What Implications


🟦 For business/consumers: more use cases need to be developed by private participants. FedNow is only the infrastructure.


🟦 For financial products: less need for a payday loan/check to cash, more opportunities for payment innovation and competition.


🟦 For fraud risk: consumer advocacy points out that authorized push payment fraud (scam) could become an even bigger issue, as what happens to Zelle.


🟦 For stablecoin and CBDC: FedNow will make crypto-based payment less useful.


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Graph Source: FRBServices site

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