FedNow is a bipartisan solution created by the Federal Reserve of the United States to modernize government payments and increase the speed of transactions between bank accounts. With the launch of this system in July 2023, the wait time for transactions to settle between bank accounts can be almost instant, which is a much better result than the multiple days it usually takes now. This system has been met with some misinformed reaction and fear mongering about Central Bank Digital Currencies (CBDCs), however it is important to note that FedNow is not a digital currency and it has nothing to do with a CBDC.
The introduction of the FedNow system is incredibly beneficial for both consumers and businesses and will provide them with faster access to funds and improved cash flow management. The addition of this innovation to the American banking industry is timely, as 14 years ago there were no digital payment systems for the banking sector. The commercial sector, however, was faster and brought about revolutionary change with the creation of transfer gateways such as PayPal, Cash App, Bitcoin payments and other fintechs.
FedNow is open to more than 10,000 financial institutions that operate within the Federal Reserve’s network and it provides interoperability with payment systems like Fedwire, Automated Clearing House (ACH) system, and cryptocurrency tokens. This offers consumer the opportunity to securely access their funds any time, reducing the need to wait in line or wait for a manual processing.
A key benefit of a CBDC is to “support faster and cheaper payments” — which the FedNow System offers to the banking sector. Additionally, there are many sceptical politicians who have not fully realised the complexity of launching a CBDC, from the necessary legal and compliance, financial and technology requirements as well as the passing of a CBDC law. However, the successful introduction of FedNow to the US banking sector means that the need for a CBDC may become obsolete.
The FedNow System is the first step for the US federal government for the digital transformation of its banking payments and the improvement of consumer experience. With the continued success of this system, the US government can save the nation from a CBDC.
Dorothy Reyes
- 2023-05-08
FedNow: The Federal Reserve's Bipartisan Solution for Modernised Payments
FedNow is a bipartisan solution created by the Federal Reserve of the United States to modernise government payments and increase the speed of transactions between bank accounts. This system has been met with some misinformed reaction and fear mongering, however, it is important to note that it is not a digital currency and it has nothing to do with a Central Bank Digital Currency (CBDC). Find out all the benefits of this system here!
