The Federal Reserve said on Wednesday that its fast payment tool FedNow will be available in July.
The instant payment network will be able to support consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank transactions in seconds.
“With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible,” said Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program’s executive sponsor.
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According to the Fed, a diverse group of banks of various sizes, including the largest processors and the U.S. Treasury have agreed to participate. The central bank is continuing to consult with financial institutions and service providers in order to test the program before it goes live.
“With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive.
Montgomery stated that the service’s availability is only the beginning, and that expanding the network of partner financial institutions would be critical to extending the availability of rapid payments for individuals and companies across the country.
The Fed will begin formally certifying banks to provide the service in the first week of April. To prepare for sending live transactions through the system, early adopters will need to conduct customer testing based on input from the FedNow Pilot Program.
The central bank contends that making funds available instantly will benefit Americans living paycheck to paycheck and small firms with cash flow restrictions by eliminating late payment fines and freeing up working capital to fuel growth.
The announcement comes at the height of some of the biggest bank collapses caused by liquidity crunches among Silvergate Bank, Silicon Valley Bank, First Republic Bank, and others.
This also comes after federal regulators have been increasingly intensifying their focus on the crypto space.
Access will be provided through the Federal Reserve’s FedLine network, which serves more than 10,000 financial institutions directly or through their agents, to enable access.
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