The Federal Reserve has launched its Fednow Service for instant payments with 35 participating banks and credit unions, as well as 16 service providers. “The Federal Reserve is committed to working with the more than 9,000 banks and credit unions across the country to support the widespread availability of this service for their customers over time,” the U.S. central bank stated.
Fednow Officially Live
The Federal Reserve announced Thursday that its new system for instant payments, the Fednow Service, has launched with 35 participating banks and credit unions, the U.S. Department of the Treasury’s Bureau of the Fiscal Service, and 16 service providers. Participating financial institutions include BNY Mellon, JPMorgan Chase, Peoples Bank, U.S. Bank, and Wells Fargo Bank.
“The Fednow Service is designed to maintain uninterrupted 24x7x365 processing with security features to support payment integrity and data security,” the Federal Reserve detailed, adding:
The Fednow Service is neither a form of currency nor a step toward eliminating any form of payment, including cash.
Fed Chair Jerome Powell commented Thursday: “The Federal Reserve built the Fednow Service to help make everyday payments over the coming years faster and more convenient.” He continued: “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.”
Functioning as an interbank payment system, the Fednow Service operates alongside other well-established Federal Reserve payment services like Fedwire and FedACH. The Fed’s announcement described:
The Federal Reserve is committed to working with the more than 9,000 banks and credit unions across the country to support the widespread availability of this service for their customers over time.
Many people took to Twitter to comment on the new Fednow Service. A number of individuals believe that its launch paves the way for a central bank digital currency. However, the Federal Reserve has insisted that the Fednow Service is not related to a CBDC.
Some people believe that the Fednow Service eliminates the need for cryptocurrencies. Omid Malekan, adjunct professor at Columbia Business School, explained: “Arguing that Fednow eliminates the need for crypto (or even stablecoins) is like arguing in 2005 that replacing VHS rented from Blockbuster with DVDs eliminated the need for streaming. P.S. Fednow is 25 year old tech. America is just really late to the game.”
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