The FedNow instant-payments network finally launches — but not to replace Venmo
“FedNow me”… just doesn’t have the same ring to it. Yesterday the Fed rolled out its instant-payments network, FedNow, to a few dozen financial institutions, including JPMorgan Chase and Wells Fargo, with plans to expand. FedNow lets banks and credit unions transfer up to $500K directly from account to account in seconds, speeding up money movement for businesses and individuals. It runs 24/7, so no need to count “business days.”
Very direct deposit: If your bank signs up for FedNow, you can make and receive payments in real time (imagine: paying rent on August 5 at 11:59 p.m.). If your employer also uses the service, your paycheck could hit your account quicker.
FedSoYesterday: Banks have been waiting longer than Rihanna fans for FedNow, the Fed’s first new payments network since the ’70s. The UK, India, and Brazil have had instant infrastructure running for years.
There’s (not) an app for that… FedNow doesn’t have a Venmo equivalent (it’s a back-end system designed to be used by banks, not brunchers). Peer-to-peer payment platforms like PayPal and its subsidiary Venmo mostly use the current government-backed network (the Automatic Clearing House) to make transfers. Transfers seem instant when you’re sending from Venmo to Venmo, but moving $$ to bank accounts usually takes days to clear. Still, apps like Venmo won’t be able to directly offer FedNow’s speedy service.
Old habits die hard… Businesses and consumers are used to transfers taking time to clear, so banks might not be quick to adopt (and pay for) FedNow services. Experts predict the shift could be slow, saying that instant-payment systems haven't gained much traction in countries like the UK. But the benefits of real-time transfers could make the transition worth it for some, and banks that offer FedNow could have a leg up.