Federal Reserve launches FedNow for instant payments

The Federal Reserve officially launched FedNow, an instant payment service that provides round-the-clock payment and settlement. Initially, the service will have a transaction limit of $100,000 per customer, which may later be expanded to $500,000.

The Federal Reserve’s new payments service, FedNow, promises consumers the ability to send and receive money in seconds. But it is worth noting that the solution will be controlled by the central bank.

Americans can use FedNow every day of the year, allowing residents to instantly pay for everyday essentials and send money to loved ones. Additionally, businesses can pay suppliers in a timely manner through the network.

Initially, the service set a transaction limit of $100,000 per customer. Still, the Fed signaled the possibility of raising the limit in the future.

Federal Reserve Chairman Jerome Powell (Jerome Powell) emphasized that the FedNow instant payment solution aims to provide Americans with “faster and more convenient” options for everyday payments.

Powell added:

“Over time, as more and more banks choose to use this new tool, the benefits to individuals and businesses will include enabling individuals to receive their paychecks immediately, or companies to receive funds instantly when an invoice is paid.”

With the FedNow service now live, the Federal Reserve is unlikely to launch its central bank digital currency (CBDC) anytime soon.

The Federal Reserve has clarified that the service will not be offered directly to individuals and businesses, as FedNow payments are only facilitated by banks. This differentiates the service from existing payment apps such as Venmo.

Last April, U.S. Federal Reserve Board member Michelle Bowman argued that the risks associated with CBDCs far outweigh their benefits. Bowman concluded that creating a US CBDC might not be the right thing to do.