The U.S. Federal Reserve has confirmed its long-awaited instant payments system FedNow, seen as an alternative to CBDCs and stablecoin payments, will launch in July
The United States Federal Reserve announced the launch of the FedNow instant payments system would take place in July. The formal certification of the system participants will start in early April.
The Fed first unveiled the concept of FedNow – a round-the-clock, real-time gross settlement system – in 2019. Last September, the pilot phase of technical testing started. Over a hundred financial institutions participated in the pilot program.
Before the final launch, the Fed will formally certify participants who will complete a customer testing and certification program to prepare for sending live transactions through the system.
At the initial launch, the novel real-time payment service will support the account-to-account and consumer-to-business bill pay use cases. However, FedNow will be able to cater to other use cases in the future.
The latest announcement stated that the U.S. Treasury and a “diverse mix of financial institutions of all sizes” are already on board, ready to use the payment network from the very launch. Besides, after the official launch, the Federal Reserve will try to onboard as many financial institutions as possible to increase the availability of instant payments to consumers and businesses.
The main benefits of FedNow include instant payment settlement, oversight by the Federal Reserve Clearing House’s RTP network, and built-in fraud risk management features. The system will funnel commercial bank money from a sender through a Fed credit account to its recipient.
Although the system doesn’t use blockchain technology, it is seen as an alternative to central bank digital currencies (CBDCs) and stablecoins, as all these payment means address the same issues.
While a potential U.S. CBDC is still a long way away, FedNow will be a viable nationwide means of instant fund settlement, offering recipients greater flexibility to manage their money and make time-sensitive payments.