Federal Reserve Announces NEW 24x7x365 Instant Payment interbank Settlement Service
The Federal Reserve Board on Thursday announced details of the FedNow℠ Service, a new 24x7x365 interbank settlement service with clearing functionality to support instant/real-time payments in the United States.
What is the Federal Reserve?
The Federal Reserve, or Fed, is essentially the central bank of the U.S., being in charge of the country’s monetary policy. It is governed by the presidentially nominated board of governors called the Federal Reserve Board. The board announced the FedNow project on Monday, Aug. 5, 2019 via a press release, and has been
Interestingly, 10 years prior to that, in October 2008, the Federal Reserve attempted to register “FedNow” as a trademark. However, the application was dismissed by the U.S. Patent and Trademark Office later in 2013 on the grounds that the Fed then abandoned it, according to the database.
President Donald Trump also signed executive order 13772 back in 2018, which mentioned the “faster payments task force” and Ripple.
Moreover, in May 2015, the Fed established the Faster Payments Task Force to “identify and evaluate alternative approaches to implementing safe, ubiquitous, faster payments capabilities in the United States.” The program announced Ryan Zagone from Ripple as one of the participants, and the task force eventually highlighted the company’s progress with cross-border payments.
By launching FedNow, the U.S. central banking authority aims to modernize the country’s payment system with a real-time service that can transfer funds around the clock, both on weekends and weekdays. The government’s current system is closed on weekends, and it can take up to several business days to settle a transaction.
The features and functionality described in the accompanying Federal Register notice represent a key milestone in the FedNow Service’s development and are based on input received from the public in response to the Board’s 2019 request for comment. The Federal Reserve will take a phased approach to service implementation. The first release of the FedNow Service will provide core clearing and settlement features that will support market needs and help banks manage the transition to a 24x7x365 service. Based on ongoing stakeholder engagement, additional features and service enhancements will be introduced over time. The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed.
The Federal Reserve has a long-standing role in providing payment and settlement services to promote an accessible, safe, and efficient U.S. payment system. The FedNow Service, alongside similar services provided by the private sector, will modernize the U.S. payment system and bring the benefits of instant payments broadly to communities across the country.
“The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints,” said Federal Reserve Board Governor Lael Brainard. “Since we initiated FedNow one year ago, we have been hitting our project milestones, and today I am pleased to announce the Federal Reserve Board has approved the core features and functionality based on extensive input from stakeholders.”
The Board’s Federal Register notice is attached.
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