What You Should Know About the Federal Reserve’s New Instant Payments System
The use of mobile payment apps and person-to-person (P2P) payments are more popular than ever, giving businesses and consumers the ability to send and receive money instantly. According to a recent study, the share of P2P payments made with mobile apps nearly doubled in one year, increasing from 15% in 2020 to 29% in 2021. In response to the growing demand for these types of instant payment services, the Federal Reserve will be launching its own real-time, instant payment system called the FedNow Service (FedNow).
What Is the FedNow Service?
The FedNow Service is a new instant payment system developed by the U.S. Federal Reserve. Traditionally, payments between banks—such as checks or ACH transfers—require clearing and settlement and can take one to several business days to complete.
FedNow changes this by enabling near real-time clearing and settlement between participating banks and credit unions. Funds can move from a sender’s account to a receiver’s account within seconds, 24/7/365, including weekends and holidays.
By participating in FedNow, financial institutions can offer instant payments directly from bank accounts.
How Does FedNow Benefit Consumers and Businesses?
The Federal Reserve designed FedNow to make payments faster, safer, and more efficient, which can encourage economic activity.
Key benefits include:
For Consumers
- Immediate access to funds (e.g., wages, refunds, emergency payments)
- Reduced risk of overdraft fees and late payment penalties
- Greater flexibility for time-sensitive payments such as rent or utilities
For Businesses
- Faster receipt of payments improves cash flow
- Better budgeting and liquidity management
- Reduced uncertainty around payment timing
Who Can Use the FedNow Service?
- Eligible participants:
All U.S. depository institutions, including banks and credit unions - How consumers and businesses access it:
Through their bank or credit union’s online or mobile banking system - Participation is optional:
Each financial institution decides:- Whether to participate
- How to participate (FedNow allows different participation models)
- When to implement the service
Some institutions adopted FedNow early, while others may delay or choose not to participate at all.
When Did FedNow Launch?
- Initial launch: July 2023
- Future development:
Additional features and enhancements are being rolled out in phases over time
For official updates and technical details, the Federal Reserve provides information at explore.fednow.org.
IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
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