News fer the Woke
07-21-23FINANCING THE FUTURE
'Your paycheck could arrive in seconds with FedNow. These banks are already signed on
The Federal Reserve has officially announced the launch of a new instant payments service that is designed to modernize the way bank funds are transferred in America.
BY MICHAEL GROTHAUS3 MINUTE READ
The Federal Reserve has officially announced the launch of a new instant payments service that is designed to modernize the way bank funds are transferred in America. The new payment system is called the FedNow Service, and it will allow you to receive your paycheck in seconds instead of days. Here’s what you need to know.
What is FedNow? FedNow is a new system for making nearly instantaneous payments to bank accounts. The system was first announced in 2019 and is meant to modernize the way payments are made. If a bank adopts the FedNow service, payments between businesses and individuals could be transferred in seconds instead of the days it takes now. In many other parts so the world, this type of near-instant money transfer has existed for years.
How will FedNow help me? If you’re an individual, you could now receive your paycheck from your employer seconds after they initiate the funds transfer from their bank to yours, instead of the days it takes now. FedNow will also enable you to send a payment—such as one for an online bill for your electricity—in seconds to the energy supplier. This means that even if you forgot to pay a bill until the last minute, FedNow could now ensure that your payment reaches the company before the due date, saving you money on late fees and preventing your power from being switched off.
Do I have to sign up to use FedNow? No. FedNow isn’t a consumer service money transfer app like Venmo or PayPal. Instead, FedNow is a service the Federal Reserve makes available to banks. The banks will build the service into their back end. This means that as long as the bank has signed on to the FedNow service, the customer will benefit without having to do anything other than transfer or receive funds.
Does FedNow have an app that I send funds through? No. FedNow is a service banks can choose to adopt. If your bank adopts the FedNow service, you will benefit from it when you send or receive money from/to your bank account. You will still use your bank’s app or website to send money just like you do today.
Does FedNow cost money? No. The service is free to use for consumers. But as Reuters notes, it’s not yet clear if banks will somehow pass on the costs of adopting the service to consumers.
Does FedNow only work during business hours? No—and this is a big benefit of the new service. Currently, if you send money or get sent money, the transfers usually only go through during business hours. But FedNow operates 24 hours a day, 7 days a week. This will allow for money transfers around the clock and means that if your employer pays you at the close of business day on a Friday, you’ll get that payment seconds later instead of having to wait until Monday or Tuesday of the next week.
Are there any drawbacks to FedNow? Right now there are. In order for you to benefit from FedNow, both your bank and the bank of the person or company sending you funds must adopt the FedNow system. If only your bank uses FedNow, but your employer’s bank does not, any paycheck they deposit into your account will still take days to arrive.
Is FedNow mandatory for banks? No. The Federal Reserve is not requiring banks to sign on to the FedNow service.
Which banks currently support FedNow? Currently, just 35 banks and credit unions (out of the 9,000 across the country) have adopted FedNow. However, keep in mind this is very early days for the service and more banks are likely to adopt it as time goes on. The major banks that have adopted FedNow currently include JPMorgan Chase and Wells Fargo Bank. You can check out the list of all the supporting banks here.
Where can I learn more about FedNow? The Federal Reserve has an information video, which is embedded below. You can also check out the FedNow website here.
https://www.fastcompany.com/90926676/fednow-launch-instant-payment-banks-list-paycheck-seconds-federal-reserve
there's even a video cuz, you know, who can read anymore?