What is FedNow?
After nearly 10 years of research across several committees, FedNow was officially launched by the Federal Reserve on July 20, 2023, FedNow is the instant digital money transfer tool introduced by the Federal Reserve. FedNow is not replacing existing digital money transfer tools like PayPal, Venmo, CashApp, Google Pay or Zelle. It is an alternative that your bank may choose to participate in.
Is It a Digital Currency?
No. FedNow is not a digital currency and is not intended to replace the US Dollar. The Federal Reserve has not made a decision on whether or not to pursue a central bank digital currency (CBDC). In March 2023, Chair Powell expressed that a CBDC is “something we would certainly need Congressional approval for.”
Why Did the Federal Reserve Roll Out FedNow?
Stemming from a public consultation paper from 2013, the Federal Reserve launched the Faster Payments Task Force (FPTF) in 2015. The FPTF was tasked with identifying and assessing alternative methods for safe and ubiquitous instant payment capabilities. The results of the FPTF findings launched the creation of the Governance Framework Formation Team which made way for the US Faster Payments Council to be established in 2018.
Come 2017, FPTF’s final report requested the Federal Reserve develop a 24-hour, 7 day a week, 365 day per year settlement service to support instant payments plus explore and assess the need for other operational roles in faster payment. As a result, the US Treasury recommended “the Federal Reserve move quickly to facilitate a faster retail payments system, such as through the development of a real-time settlement service, that would also allow for more efficient and ubiquitous access to innovative payment capabilities”.
This prompted the Board to publish a request for comment in 2018. Next was a public notice to be published in August 2019, announcing Reserve Banks would develop FedNow. Finally on August 6, 2020 the Board published a final notice with details on the features at launch, which was initially targeted for 2023 of 2024.
How Does FedNow Work?
FedNow is an instantaneous transfer directly to/from your bank account with funds transferred within seconds. It can be used 24/7, even on days that banks are closed. There are some limitations though, this service is only available for money transfers within the United States and the default limit on transfers is $100,000. Participating banks are allowed to raise their transfer limit up to $500,000. FedNow is a real-time settlement system, and payments are irreversible.
Does My Bank Use FedNow?
FedNow is optional for banks to opt in. You can use this link to see if your bank or credit union participates: https://www.frbservices.org/financial-services/fednow/organizations. As of February 2025, over 1200 local, regional, and national banks are part of the FedNow service.
Resources:
- https://www.federalreserve.gov/paymentsystems/fednow_faq.htm
- https://www.federalreserve.gov/paymentsystems/fednow-additional-questions-and-answers.htm
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