Federal Reserve’s New Real-Time Payment Network Goes Live in 35 Banks

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The Federal Reserve has launched an instant payment
system that enables users in the US to transfer money electronically. In a
statement released today (Thursday), Fed's Chair Jerome Powell said that the
new system makes everyday <a href="https://www.financemagnates.com/terms/p/payments/">payments</a> faster and more convenient.</p><p>Dubbed FedNow, the
payment system, which has been in development since 2019, allows instant
transfers for amounts up to USD $500,000. However, the amount is below an
estimated USD $5 million in average transactions processed on the central bank's
main money transfer system, Fedwire.</p><p>Fed Targets Major Banks</p><p>The top financial
institution in the US, including JPMorgan Chase and Wells Fargo, are among the
35 banks that have signed up for <a href="https://www.financemagnates.com/fintech/the-fednow-instant-payments-service-is-coming-in-2023/" target="_blank" rel="follow">FedNow</a>. The central bank expects that as more
lenders sign up for the <a href="https://www.financemagnates.com/tag/real-time-payments/" target="_blank" rel="follow">real-time payment system</a>, it will be able to reach more consumers and
businesses.</p><p>During the unveiling of
the new system, the Federal Reserve said that it expects more than 9,00 banks
and credit unions across the country to use FedNow. The new system will
reportedly complement the central bank's existing payment services,
such as Fedwire.</p><p>"The <a href="https://www.financemagnates.com/institutional-forex/after-silicon-valley-bank-collapse-us-fed-announces-internal-investigation/" target="_blank" rel="follow">Federal
Reserve</a> built the
FedNow service to help make everyday payments over the coming years faster and
more convenient," commented Powell. "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."</p><p>FedNow Spurs Competition</p><p>FedNow is expected to
intensify competition in the US credit card sector, where major banks have
launched competing services. For instance, <a href="https://www.financemagnates.com/tag/jpmorgan/" target="_blank" rel="follow">JPMorgan</a> launched an instant digital payment service
last year targeting institutional clients.</p><p>Similarly, the <a href="https://www.financemagnates.com/terms/c/clearing/">Clearing</a>
House, an electronic payment system owned by a group of large banks in the US,
launched a real-time payment network in 2017. The system enables everyday
financial transactions such as paying bills, issuing invoices, processing
payroll and settling insurance claims easily.</p><p>For
quite some time, the US has lacked a widespread real-time payment system,
unlike the other developed economies, the Financial Times reported. For instance, in the UK, the Bank of
England operates the Faster Payments System, which facilitates electronic
payments between banks.</p>

This article was written by Jared Kirui at www.financemagnates.com.