The Federal Reserve said Wednesday it will launch its long-awaited instant payment service FedNow in July.
The instant payment network will settle payments in seconds, with the capability to support consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank transactions.
"With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible," said Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program's executive sponsor.
"The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy."
According to the Fed, a mix of banks of all sizes, including the largest processors and the U.S. Treasury, are on board. The central bank is continuing to speak with financial institutions and service providers to test the program ahead of its implementation.
"With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service," said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive.
Montgomery noted availability of the service is just the beginning, and growing the network of participating financial institutions will be key to increasing the availability of instant payments for consumers and businesses across the country.
Starting in the first week of April, the Fed will begin formally certifying banks to launch the service. Early adopters will have to conduct customer testing, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system.
The Fed maintains making funds immediately available will help Americans living paycheck to paycheck or small businesses with cash flow constraints by avoiding late payment fees and freeing up working capital to finance growth.
Analysts say FedNow could also cut demand for payday loans as consumers won't have to wait for a check to clear. For businesses, there could also be upside for better paying suppliers on time, and businesses could embrace it as a less costly, and more certain, way to accept consumer payments.
Fed Governor Michelle Bowman said last year that FedNow, which will enable consumers and businesses to send payments instantly, could offer some of the same benefits as a central bank digital currency.