Federal Reserve To Launch New Payment Service
The stodgy Federal Reserve announced plans to allow banks to transfer funds in almost-real time, all day, every day, beginning in 2023.
The FedNow service promised by the “bank of bankers” will end annoying three-day holds on fund transfers, helping cash-strapped individuals. Banks will howl at the prospect of losing lucrative NSF (Non- Sufficient Funds) fees that approach $40 per bounced check. People living paycheck-to-paycheck should appreciate the quicker availability of paychecks. Many people report instances of banks bouncing checks while money added to their account is “on hold.”
The Daily Wire further reported:
FedNow, which the central bank has been developing for the past several years, is intended as a “flexible, neutral platform that supports a broad variety of instant payments” such that consumers can immediately send money through their financial institutions, according to a description from the central bank. Federal Reserve Vice Chair Lael Brainard said during a speech to developers that FedNow will “transform the way everyday payments are made throughout the economy.”
“Immediate availability of funds could be especially important for households managing their finances paycheck to paycheck or small businesses with cash flow constraints,” she explained. “Having the capacity to manage money in real time could help households avoid costly late payment fees or free up working capital for small businesses to finance growth.”
Among other examples, FedNow is set to eliminate merchants’ need to wait one to three days before payments are finished depositing, as well as the need for workers to wait days before receiving paychecks. Retailers currently pay an average interchange fee of $0.23 when consumers use debit cards, according to data from the Federal Reserve, which FedNow hopes to significantly undercut.
“Americans rely on the payment system all day every day to make purchases, pay bills, and get paid — without ever needing to consider the complex infrastructure that is operating under the hood,” Brainard added. “American households and businesses want and deserve payment transactions that work seamlessly, reliably, and efficiently.”