America federal Reserve is about to launch a new payment service that could allow Americans to send and receive money in seconds. The new service, called ‘FedNow’, will initially launch with 41 banks and 15 service providers, including community banks and large lenders such as JPMorgan Chase, Bank of New York Mellon and US Bancorp, with plans to add more banks and credit unions later. this year.
The Federal Reserve has been working on the service since 2019, but it was initially opposed by the big banks, who argued it was unnecessary, but later agreed to participate as they believed fednau Will expand the services they can offer to their customers. FedNow aims to bring the US at par with countries such as India, the UK, Brazil and the European Union by eliminating the several days it usually takes to settle cash transfers.
The Fed already operates a real-time payment system called FedWire for large, mostly corporate payments, but the service is only available during business hours, unlike Fed Now, which will be available 24/7. Reportedly, FedNow is expected to benefit consumers and small businesses the most.
The new service differs from peer-to-peer services such as PayPal and Venmo in that payments made through FedNow will be deposited directly into central bank accounts.
FedNow’s payout limit will be $500,000, but can be lowered if necessary. The new service will be free to the customer, but there remains uncertainty over how these costs will be borne by the participating banks.
There are also concerns that FedNow could exacerbate a potential bank failure by facilitating rapid outflows from the financial system, as happened with Silicon Valley Bank earlier this year. However, the Fed has sought to downplay these concerns, arguing that banks have a number of tools at their disposal to reduce outflows if necessary.
(with inputs from Reuters)
catch all technology news And updates on Live Mint. download mint news app to receive daily market update & Live business News,
Updated: July 20, 2023, 12:51 PM IST