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FedNow Integrates Micropayment Partner to Settle Retail Transactions on Hedera

2 mins
Updated by Geraint Price
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In Brief

  • The US Federal Reserve has incorporated Dropp into FedNow, leveraging Hedera's technology for faster micropayments.
  • Dropp's integration with FedNow has increased HBAR's price by 16% in the last 24 hours, according to CoinMarketCap.
  • Despite the integration, Dropp’s service could open a window for the Fed to surveil retail transaction.
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The US Federal Reserve (Fed) has integrated Dropp into FedNow payment rails to enable faster micropayments and non-fungible token (NFT) trades. Built on Hedera Hashgraph, Dropp supports USD, USDC, and HBAR transfers.

According to a press release, Dropp’s services run on Hedera’s high throughput, low-latency distributed ledger technology. The technology allows merchants to accept payments as low as one dollar cent. Merchants can also benefit from lower transaction costs to increase profits.

Micropayments Offer Cheaper Settlement for Long-Term Benefits

The technology marks a move away from a content subscription model. Instead of paying annually or monthly for a content catalog, customers can choose to only pay for what they consume.

Former Apple CEO Steve Jobs offered iTunes customers micropayments to buy songs. The strategy boosted sales of the first iPod even though transaction fees nibbled at profit margins.

Interested in crypto micropayments? Read our guide to using Bitcoin’s Lightning Network here.

Fast-forward to 2023, Apple’s services business, including music streaming, account for most of its revenue. In its Q2 earnings call, Apple’s CEO Tim Cook highlighted the role its services business played in revenue creation.

“We are pleased to report an all-time record in Services and a March quarter record for iPhone despite the challenging macroeconomic environment and to have our installed base of active devices reach an all-time high.” 

In time, Dropp wants to partner with FedNow to offer banks instant retail settlement rails. Last month, the Fed rolled out FedNow as an instant interbank settlement system to 57 companies. 

In the meantime, Dropp still uses the automated clearing house method to pay merchants. It also allows customers to connect Web3 wallets to pay with crypto.

Hedera Hashgraph (HBAR) price jumps on news of FedNow integration. Source: BE[IN]CRYPTO
HBAR/USD 24-Hour price chart | Source: BE[IN]CRYPTO

Dropp’s integration with FedNow caused the price of HBAR, the native token on Hedera, to rise 16% to $0.06529. Instead of waiting for transactions to be included in blocks before validation, Hedera improves processing speeds by allowing them to be added to its network as they happen.

Dropp Could Foreshadow Government Surveillance on Retail Transactions

Politicians argue FedNow portends economic censorship they believe aligns with the anti-crypto agenda of the US.

Pro-Bitcoin presidential candidates Robert F. Kennedy and Ron DeSantis oppose a US CBDC, with the former arguing that Bitcoin is the apolitical money the free world needs. This is despite the Federal Reserve chair Jerome Powell repeatedly saying the bank is far away from issuing a CBDC.

But the integration could extend FedNow’s reach into retail spending habits, a concern shared by British and European CBDC detractors.

In addition, opponents argue technology like Hedera is still too centralized to replace blockchains. At present, 39 “collusion-resistant” organizations govern Hedera.

Got something to say about FedNow accepting Dropp micropayments or anything else? Write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or X (Twitter).

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...