First announced in 2019, FedNow it acts as a “common web” between banks and credit unions, making it easier for them to route funds between different institutions. So far, there are only 35 participating banks and credit unions, along with the US Treasury Department’s Office of the Fiscal Service.
However, once it is widely adopted, it will allow you to transfer funds between different bank accounts instantly or even pay your credit card bill on a bank holiday without worrying about it being delayed. And, if you have direct deposit, your paycheck should show up in your account as soon as you’re paid.
FedNow doesn’t compete with apps like Venmo or Zelle, which act as intermediaries for peer-to-peer transactions, since there’s no app to install and it only works between banks or credit unions. However, it requires both financial institutions to participate in the network, and it could be months or years before those numbers grow substantially.
While the Federal Reserve has a $500,000 limit on the amount of money you can send, participating financial institutions will start with a default limit of $100,000, with the ability to increase or decrease that amount. Financial institutions can also use negative listings to help protect against fraud.
The Federal Reserve does not name the financial institutions that currently have access to FedNow, but said in June that JPMorgan ChaseBank of New York Mellon, US Bancorp and Wells Fargo are among those ready to support FedNow.
“The Federal Reserve created the FedNow Service to help make everyday payments faster and more convenient for years to come,” Federal Reserve Chairman Jerome H. Powell said in a statement. “Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include allowing an individual to receive a paycheck immediately, or a business to instantly access funds when a bill is paid.”
It’s about time the US implemented instant payment, as other parts of the world, including the European Union, UK, India, and others, have had similar systems for a long time. I don’t know about you, but I am very excited to receive my paycheck faster.