The Federal Reserve has announced that its instant settlement service FedNow will launch by July 2023. Over 120 organizations have already signed up to participate in the pilot program, which will begin this month.
The United States Federal Reserve has revealed that it will launch its FedNow payment service sometime in mid-2023. The Fed published a press release on Aug. 29, saying that it was expecting the instant settlement service to be ready between May and July. The testing period for the service will also start this month.
FedNow is an instant payment service that is accessible 24/7, 365 days a year, across the United States. It will be released in phases, with the first phase focusing on clearing and settlement. The service is perhaps a response to the likes of the Diem project, which Meta sold, and stablecoin services in the crypto market.
Over 120 organizations have signed up to participate in the FedNow pilot program, and it recently added some new members, including the U.S. Bank, Exchange Bank, and many payment processors and solution providers.
Federal Reserve Bank of Boston’s first vice president and FedNow Service program executive Ken Montgomery said of the benefits of FedNow,
“The benefits of instant payments are increasingly important to consumers and businesses, and the ability to provide this service will be critical for financial institutions to remain competitive. Next year, financial institutions will be able to use the FedNow Service as a springboard to provide innovative solutions to their customers.”
The Fed said that businesses and individuals will be able to receive payments instantly at any time and have full access to funds immediately. This, they say, will help them manage their money better and make time-sensitive payments.
The Federal Reserve has made it clear that any payment providers must comply with the law. Vice Chair of the Federal Reserve Lael Brainard has made comments saying as much and has made critical remarks about the Diem project.
Brainard has also called for the development of a central bank digital currency, something that the U.S. is looking into but has not made much progress with. She has cited the much-touted advantages of blockchain-based payment systems, such as quick and streamlined payments, as reasons for the development.
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