New York – the United States Federal Reserve FedNow, a new instant payment service, launched Thursday that allows banks and credit unions to sign up to send payments in real time. So your customers get a faster way to send money between banks.
FedNow, which was first announced in 2019, has published a list of banks and credit unions that are already registered to offer their services. However, it may take longer for customers to be able to use the service with their bank.
Here’s what you should know about FedNow:
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How does FedNow work?
FedNow offers a real-time payment service to banks and credit unions so they can transfer money from their customers.
Unlike other private money transfer services such as PayPal also VenmoFedNow will not be offered directly to customers through a third-party website or application. It will only be available through banks or credit unions, though once FedNow is approved, those institutions will likely make it available on their websites and apps.
Once a bank offers FedNow services, customers will be able to send money immediately. The service is also available 24 hours a day, seven days a week.
Among the banks that will soon offer FedNow services are Wells Fargo and JPMorgan Chase.
Why did the Fed create FedNow?
By creating FedNow, the Federal Reserve is making it faster and easier for people to send and receive payments online. With FedNow, the Fed is also catching up with other countries that already have real-time payment systems in place, including England, China, Sweden and India.
FedNow also provides banks with tools to identify and combat fraud attempts. These tools include the ability for banks to identify suspicious accounts and limit the number and frequency of payments on those accounts.
Who can use FedNow?
Customers—individuals and businesses whose banks or credit unions offer FedNow services—will be able to send and receive money in real time. For example, if a customer wants to send money to a friend, both of them must have bank accounts at organizations that provide FedNow services.
What are some situations where I can use FedNow?
Due to the speed of transactions, this service can benefit customers in several ways. Here are some examples:
- If your employer sends you your paycheck via FedNow, the check will be sent to your account in seconds, not days.
- If you forget to pay your rent until the last minute, you can send money late at night without having to wait for your payment to reflect the next business day.
When will FedNow be available to me?
FedNow is already up and running, but it could take months or years for customers to be able to use this service. It all depends on your bank offering it.
Will my privacy be protected with FedNow?
The Fed and the FedNow Service cannot access any customer’s bank accounts and have no authority to conduct additional monitoring, according to Fed officials.
Will FedNow Replace Venmo, PayPal, and Other Services?
There are key differences between FedNow and apps like Venmo and PayPal. FedNow is a service offered directly to banks, not to customers, which means that FedNow does not have an app or website through which customers can send money, including to each other.
What is the difference between FedNow and Zelle?
While FedNow and Zelle both allow customers to transact online, there are also key differences. Zelle is a proprietary app that works with some financial institutions, while FedNow is backed by the Federal Reserve It has been designed to be adopted by most of the banks in the country.
Zelle allows you to send and receive money instantly, but the money may not be available to customers until days after the transaction. With FedNow, the Federal Reserve guarantees that funds will be available in seconds. Zelle has a direct-to-customer platform that allows you to send money through its app, while FedNow will not interact directly with customers, offering its services to banks.
Will FedNow replace cash?
Federal Reserve officials stressed that FedNow had nothing to do with the concept of a government-run digital currency. It has been falsely claimed on social media that its use will result in the withdrawal of funds.
“The Federal Reserve has not made any decisions about issuing a central bank digital currency (CBDC) and will not do so without the strong support of Congress and the executive branch, ideally through specific legislation authorizing it,” the agency wrote in a series of tweets in April. A central bank digital currency will not replace cash or other payment options.