Mobile payment apps and person-to-person (P2P) payments continue to grow fast. Today, businesses and consumers can send and receive money instantly. In fact, the share of P2P payments made through mobile apps nearly doubled in just one year, rising from 15% in 2020 to 29% in 2021. Because demand for instant payments keeps increasing, the Federal Reserve is launching its own real-time payment system called the FedNow Service (FedNow).
What is the FedNow Service?
Payments between depository institutions (e.g., check and ACH transfers) typically require “clearing” and “settlement” and can sometimes take a couple of days to process. The FedNow Service will change that by providing interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real time, around the clock, 365 days a year. By participating in the FedNow Service, financial institutions will be able to process funds instantly. 2
How can the FedNow Service benefit consumers?
The Federal Reserve designed FedNow to support economic activity by making payments faster and easier. With immediate access to funds, both individuals and businesses gain more financial flexibility-especially for urgent payments. In addition, FedNow helps reduce overdraft and late fees. At the same time, businesses can manage cash flow more efficiently and improve budgeting accuracy. 3
Who can use the FedNow Service?
FedNow is available to U.S. depository institutions, including banks and credit unions. Consumers and businesses access the service through their financial institution to send instant payments. Each institution can choose participation options that fit its business needs. While many banks already prepare to adopt FedNow, others still evaluate implementation strategies. Some institutions may decide not to participate.4
When is the FedNow Service scheduled to take effect?
The initial launch of the FedNow Service is scheduled for July 2023. Additional features and service enhancements will be released over time in phases. 5 For more information, visit explore.fednow.org.
