NEW YORK — The Federal Reserve launched a new instant payment service Thursday. FedNow allows banks and credit unions to sign up to send real-time payments so they can offer customers a quicker way to send money between banks.
FedNow, which was first announced in 2019, published a list of banks and credit unions that are already signed up to the service. However, it might take longer for customers to be able to use the service with their bank.
Here’s what you need to know about FedNow.
HOW DOES FEDNOW WORK? FedNow offers instant payment services for banks and credit unions to transfer money for their customers. Unlike other private money-transferring services like PayPal or Venmo, FedNow services are not offered to customers directly through a third-party app or website. The services will be available only through banks or credit unions. However, once banks have adopted FedNow, they’re expected to make it available on their websites and apps.
Once a bank offers the FedNow services, customers will be able to send money instantly. The service is also available 24 hours a day, seven days a week.
Among the banks that will offer the FedNow services soon are Wells Fargo and JPMorgan Chase.
WHY DID THE FED CREATE FEDNOW? By creating FedNow, the Fed is making it quicker and more accessible for people to send and receive online payments. The Fed is also catching up with other countries that already have real-time payment systems like FedNow, including England, China, Sweden and India.
FedNow will also equip banks with tools to identify and combat fraud attempts. These tools include the ability for banks to flag suspicious accounts and limit the amount and frequency of payments by those accounts.
WHO CAN USE FEDNOW? Customers, including individuals and businesses, whose banks or credit unions offer FedNow services will be able to send and receive money in real time. If, for example, a customer wants to send money to a friend, both people have to bank with institutions that offer FedNow services.