The Federal Reserve Launches FedNow, an Instant Payment Service
The Federal Reserve Bank of the United States has officially launched FedNow, an instant payment service that offers payments and settlements around the clock. Initially, the transaction limit for the service is $100,000 per customer, which can later be extended to $500,000.
The Promise of FedNow
The Fed’s new payment service, FedNow, promises consumers the ability to send and receive money within seconds. However, it should be noted that the solution will be under the control of the central bank.
FedNow will be accessible to Americans every day of the week throughout the year, enabling residents to make instant payments for their daily needs and send money to their loved ones. In addition, companies can instantly pay their suppliers through this network.
Transaction Limit and Future Possibilities
Initially, the service sets a transaction limit of $100,000 per customer. However, the Federal Reserve suggested that this limit could be raised in the future.
Faster and More Convenient Payment Options
Federal Reserve Chairman Jerome Powell emphasized that FedNow’s instant payment solution is designed to provide Americans with “faster and more convenient” everyday payment options.
Powell added:
“Over time, as more banks choose to use this new tool, the benefits for individuals and businesses will include enabling a person to receive a paycheck immediately or enabling a business to have immediate access to funds when the bill is paid.”
FedNow and Central Bank Digital Currency (CBDC)
With FedNow now live, the Federal Reserve is not likely to launch its own Central Bank Digital Currency (CBDC) anytime soon.
The Fed made it clear that the service would not be directly available to individuals and businesses, as FedNow payments are only facilitated by banks. This differentiates the service from existing payment apps like Venmo.
Last April, Michelle Bowman, a member of the US Federal Reserve Board of Governors, argued that the risks associated with central bank digital currencies far outweigh the benefits. Bowman concluded that creating a digital currency for the US central bank might not be the right thing to do.