An insurance company, for instance, could make an immediate payment to help a policyholder whose home or car was damaged by a devastating storm. Instant payments can also be critical in a crisis. The instant transfer of money 24/7 means that individuals and business owners will have much greater flexibility in managing their cash flow, because they will not face delays in essential deposits and payments due to a clearing process between financial institutions.Īs an FAQ on the FedNow Service puts it, “This flexibility is especially important for individuals and households on tight budgets, for whom receiving a payment in real time could help avoid the need to use expensive check-cashing services, engage in high-cost borrowing, or incur overdraft or late fees that may throw off their carefully managed finances.” Unlike autopay features that automatically pull money out of your account to pay bills on a given date, FedNow is “push only,” meaning you must authorize a payment before it’s made. In other words, banking hours and bank holidays won’t restrict when payments can be made and recorded.
All transfers may be made at any time of day or night, any day of the year. And the person or business being paid will have access to their money within seconds.Īlso new: FedNow will operate around the clock. The transaction will be finalized in real time. There will be no waiting period for clearance and settlement of payments.
“Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.”īased on what’s known so far, here’s what FedNow may mean for you, and how it will differ from other payment options you may use like Venmo or Zelle.įedNow’s infrastructure - several years in the making - will facilitate the instant transfers of money between accounts at different institutions that choose to join the network. “The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” said Fed Chair Jerome Powell. On Thursday the Federal Reserve launched the first phase of an instant payment infrastructure called FedNow Service that promises to make the option of safe, real-time payments much more widely available, whether someone banks at a large or small US financial institution. While payment processing at financial institutions has become faster over the years - and some large players already are part of a “real-time payment” network - many people still may have to wait at least one business day to have access to 100% of deposits they receive or for payments they make to clear. When it comes to getting paid - and paid back - most people and businesses want their money as quickly as possible.
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