The Federal Reserve announced the launch of its novel instant payment system, the FedNow Service, which is acknowledged to be “a flexible, neutral platform that supports a broad variety of instant payments”. In a subsequent statement, the board clarified that the system is not connected to digital currencies, adding that no decision on the issuance of central bank digital currencies (CBDCs) has been made by the Federal Reserve.
On July 20, Federal Reserve released an official post declaring the launch of the FedNow Service, intended to facilitate instant payments for individuals and institutions through their depositary institution accounts. The new system also holds optional features including fraud prevention tools and the board hinted that more features would be introduced over the course of time.
Jerome H. Powell, the Federal Reserve Chair commented that the FedNow Service has been set to make “everyday payments over the coming years faster and more convenient”. He added:
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.
As per the announcement, FedNow Service is an internet payment system to maintain uninterrupted all-time processing that operates alongside other Federal Reserve payment services including Fedwire and FedACH. The system provides a simple and easier transfer of funds from the sender’s account to the receiver’s account “in near real-time and at any time, any day of the year”.
Following the press release, in an attempt to clarify ambiguities regarding the connection of FedNow Service with CBDCs, the board asserted, “The FedNow Service is not related to a digital currency”. The Federal Reserve added that the payment service is “neither a form of currency nor a step toward eliminating any form of payment, including cash”.
