FedNow, the instant payments project by the US Federal Reserve, will soon see the light of the day as the country marches full steam ahead towards digital payments. As per governor Lael Brainard, the US Federal Reserve is setting up a real-time payment solution named FedNow to help speed up transaction efficiency and speed.
FedNow aims to bring financial access to more Americans, especially in today’s pandemic-ridden times. COVID-19 has shown that people today need quick, cashless access to funds. The program was announced almost a year ago, but COVID-19 accelerated its development with the Fed assigning more than 100 people for the project.
FedNow set to go live in 2023 or 2024
Brainard stated that the team has made ‘substantial strides’ on the project. The full-scale launch is slated for 2023. However, the Fed wants to launch a crucial feature-laden version before the launch date to cushion the financial system, and more features will be added later on.
FedNow would provide interbank clearing and settlement service besides a host of other vital banking-related solutions. It will also support liquidity management and anti-fraud mechanisms, as well. ISO 20022 messaging standard will be the default functionality in the upcoming system to help simplify the RTP network of the Clearing House.
Furthermore, FedNow would allow the users to make payments using the phone number or email of the recipient. However, these features would be added later on in the full version.
COVID-19 accelerated development of FedNow
Brainard says the Coronavirus has shown that digital payments are crucial in times of emergency. Cares Act payments were processed mostly using traditional channels such as direct debits. The delays led to heavy financial losses and, in turn, reduced the actual impact of the stimulus.
On the other hand, instant payments could have sped up the whole process and quickly reduce the financial burden of millions of Americans. The FedNow system would aim to achieve this and much more when it launches in the next few years. It would Fed’s next-gen payment mechanism and bring digital payments innovation to every American home.