This week, the Federal Reserved announced that it will be deploying FedNow, an instant payment system, in 2023.
The new payment solution would give consumers direct access to central bank funds without the need for any of the ‘middlemen’ that make digital transactions possible today.
FedNow is being called an ‘instant’ payment system because transactions would be settled almost instantly in accounts and funds would be available for immediate use.
Currently, whenever a customer swipes a card, the merchant takes an average of $0.23 per transaction. The new platform would cost only a fifth of that and would get rid of the intermediary merchant, thus saving both businesses and people money.
While the system would not eliminate the need for private banking institutions, it would provide an alternative free of the minimum balance requirements or annual fees typically charged by those institutions.
Though it’s still just under a year from rolling out, FedNow is not without its critics. Critics have concerns as to whether or not popular services built on the current system, like Venmo and Zelle, would be able to work in conjunction with the new system.
The Fed’s Vice-chair Lael Brainard spoke on the hope to make that happen but said that it’s not up to the Fed as much as their partners. The launch date and scalability of the payment solution, Brainard explained, will depend on how fast banks, companies, and other institutions update their payment structure.