FedNow, which the central bank has been developing for the past several years, is intended as a “flexible, neutral platform that supports a broad variety of instant payments” such that consumers can immediately send money through their financial institutions, according to a description from the central bank. Federal Reserve Vice Chair Lael Brainard said during a speech to developers that FedNow will “transform the way everyday payments are made throughout the economy.”
“Immediate availability of funds could be especially important for households managing their finances paycheck to paycheck or small businesses with cash flow constraints,” she explained. “Having the capacity to manage money in real time could help households avoid costly late payment fees or free up working capital for small businesses to finance growth.”
Among other examples, FedNow is set to eliminate merchants’ need to wait one to three days before payments are finished depositing, as well as the need for workers to wait days before receiving paychecks. Retailers currently pay an average interchange fee of $0.23 when consumers use debit cards, according to data from the Federal Reserve, which FedNow hopes to significantly undercut.