The Federal Reserve Bank is developing a new service called FedNow that will allow all banks in the United States to offer 24/7 real-time payment services every day of the week.
FedNow is expected to be available by 2023 or 2024 and will initially support transfers of up to $25,000.
FedNow will make managing budgets easier for many people and small businesses, but it also puts the Fed at loggerheads with big banks since a federal real-time payments system would compete with the one being developed by the Clearing House, which is owned by some of the world’s largest banks, including Capital One, Citibank, Wells Fargo, Bank of America, JP Morgan Chase and Deutsche Bank.
While Venmo, Zelle and other apps already allow users to transfer money instantly to one another, the Federal Reserve Bank described services like those as a closed loop since both parties need to be on the same platform to transfer money and they can only be linked to accounts from certain banks. FedNow will be a universal infrastructure, enabling all banks, including smaller ones, to provide real-time payments.