Instant payments finally reach America with FedNow

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Instant payments finally reach America with FedNow
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Americans can now ping money to each other, via their existing banks, and settle payments straight away

It is a problem the Federal Reserve is trying to fix with a centralised instant-payments system, which it launched on July 20th. Aptly called FedNow, this will allow Americans to ping money to their compatriots, via their existing financial institutions, and for payments to settle straight away. All told, 35 banks and 16 payment providers have signed up to use the service.

Typically, Americans use different methods for different types of payment: a water bill is paid via bank transfer; $100 owed to a friend is sent through a payment app; a purchase on Amazon is made with a credit card. A single, real-time payments solution should improve the quality of all. Some observers, recalling the banking turmoil this spring, worry that FedNow might destabilise the financial system. A report by Moody’s, a credit-ratings agency, warns that the new scheme could make bank runs more likely by making it easier for depositors to flee. Such worries are likely to prove overblown, however. The current system, where weekends are closed for business, provided little relief to Silicon Valley Bank and others a few months ago.

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