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Yesterday, the US Federal Reserve officially launched FedNow, a new system rolled out to 35 early-adopting banks and credit unions for processing instant payments between financial institutions. The Fed’s goal is to eventually connect more than 9,000 banks and credit unions nationwide, tossing out the old payments system and supporting faster payment processing between all US institutions.
If FedNow becomes popular enough, it could one day make trouble for apps like PayPal and Venmo, which serve as intermediaries to make fast payments between banks. Cash apps could eventually seem so slow or unnecessary that they become obsolete. For now, peer-to-peer payments apps seem safe, though, as analysts told NBC News that FedNow is “likely to benefit consumers and small businesses the most.”
“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” Federal Reserve chair Jerome Powell said in a press release. “Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck or a company to instantly access funds when an invoice is paid.”
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