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What Is Fednow? Here’s What You Need To Know

Last Updated August 10, 2023 1:29 PM
Andrew Kamsky
Last Updated August 10, 2023 1:29 PM

Key Takeaways

  • FedNow is a new instant payment infrastructure developed by the United States Federal Reserve, available 24/7, 365 days a year.
  • It allows financial institutions to clear and settle retail payments in real-time.
  • The service was launched July 20, 2023, and aims to foster innovation and competition in the payments industry.
  • The FedNow Service offers increased financial flexibility, and streamlined payment processes..

What Is FedNow?

FedNow is a new interbank system developed by the United States Federal Reserve Banks (FED), which operates all-year-round offering real-time gross settlement (RTGS) services.The FedNow infrastructure and service was launched on July 20, 2023. It is available to depository institutions in the United States. 

The objective of FedNow is to support faster uninterrupted payments in the United States. Individuals and businesses may send and receive payments within seconds at any time of the day, on any day of the year. 

The FedNow service will be available to banks eligible to hold accounts at the Reserve Banks and will be used by any bank or credit union that chooses to adopt the service.

These Federal Reserve Banks, named The Federal Reserve bank of; Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Alongside the Board of Governors in Washington, D.C., play important roles in monetary policy, banking supervision, and payment services within their respective geographical districts. 

The rollout of the FedNow Service will occur in stages, commencing in July 2023, with the initial phase concentrating on Account-to-Account and Consumer-to-Business Bill payments. Following this, additional releases will cater to various use cases, including business to consumer (B2C) payments, immediate payroll, business to business (B2B) re-invoicing, and government tax payments, among others.

How Does FedNow Work?

FedNow will settle payments using the ISO 20022, a standard for exchanging electronic messages which uses Extensible Markup Language (XML) syntax and offers structured, rich data. The message holds the capabilities to ensure compatibility and throughput for financial institutions to make transfers to each other. 

When payment is initiated, it requires that the financial institution receiving the transaction needs to accept the payment via a clearing step which reduces returns and avoids unnecessary delays across the service.

However, after adopting FedNow, banks may offer access to the FedNow service through their websites and applications, allowing users to send and receive money instantly whenever they choose, including on weekends. Wells Fargo and JPMorgan Chase are among the financial companies that will soon offer FedNow services.

Unlike popular private money-transferring platforms such as PayPal, FedNow services are exclusively accessible through banks or credit unions, not directly through third-party apps or websites. 

What Is FedWire? 

FedWire is a real-time gross settlement funds transfer system operated by the United States FED. It allows financial institutions to electronically transfer funds between its participants. Transfers can only be initiated by the sending bank once they receive the proper wiring instructions for the receiving bank. 

FedWire settles transactions individually and immediately, making each transaction final and irrevocable upon completion. The system operates on weekdays from 9 pm the prior calendar day to 7 pm Eastern Time, excluding holidays.

FedNow Vs. FedWire

The main differences between FedNow and FedWire are explained below:

Operating Hours

The primary difference between FedNow and FedWire is that FedNow is available throughout the year, whilst FedWire on weekdays only.

Settlement Speed 

FedNow is designed to settle payments within seconds, providing real-time settlement, whereas FedWire may take longer to settle transactions due to its weekday-only operation and possible time zone differences.


FedNow aims to provide broader access to faster payment services to financial institutions of any size and location, including those that might not have access to other private-sector payment systems. FedWire, on the other hand, is primarily used by financial institutions for large-value, time-critical payments.

What Are The Benefits Of FedNow?

Some of the benefits of FedNow include:

Instant Payments 

FedNow’s main feature is real-time, instant payments, which enables individuals and businesses to send and receive money within seconds, 24/7, and every day of the year. Thus, eliminating the need for traditional payment methods that can take hours or days to complete.

Increased Accessibility 

FedNow bridges more financial institutions together by facilitating instant payment services, even including smaller community banks. This means that more people, regardless of the size or location of their bank, can benefit from faster payments and have access to paychecks or funds immediately.

Efficiency And Error Reduction 

The underlying infrastructure ISO 20022, that runs FedNow and that governs FedNow has enhanced the efficiency and reduction in errors of payment transactions. By leveraging FedNow, businesses can streamline their payment processes, ensuring that transactions are completed accurately and promptly.

Financial Flexibility 

With FedNow, recipients of payments have immediate access to funds, allowing for greater financial flexibility when making real-time payments or urgency.

What Are The Drawbacks Of FedNow?

Some of the drawbacks of using FedNow are explained below:

Loss Of Interchange Revenues 

In a report and podcast  by Moody’s, it is highlighted that some payment players are heavily reliant on card interchange fees for revenue.As consumers and businesses start using and interacting with FedNow the need for traditional card-based payment methods will reduce, which may result in a reduction in revenue. 

This shift to instant payments may reduce revenue for smaller banks and institutions as these institutions earn revenue from fees made by customers using card transfers. FedNow will reduce the need for these card payments which may impact issuers who rely on transaction processing fees, thereby affecting smaller banks’ income streams.

Increased Cybersecurity Risks 

The 24/7 availability of the FedNow system may require financial institutions to invest more heavily in technology and human resources  to closely monitor funds movement around the clock.

This is required to safeguard institutions from cyberattacks, which may become a more significant concern in a real-time payment environment.

Risk Of Bank Runs 

With payments moving more quickly in the FedNow system, there is a concern that it could increase the possibility of bank runs.

 A bank run occurs when a large number of depositors withdraw their funds from a bank simultaneously, often due to fears of the bank’s insolvency, leading to a liquidity crisis and further exacerbating the bank’s financial difficulties. 

A liquidity crisis is a situation in which a financial institution faces severe difficulties in obtaining enough cash or liquid assets to meet immediate financial obligations. 

As a result, the speed of withdrawals, particularly during stressful financial situations, may exacerbate the risk of bank failures due to the ease of FedNow movement of money.

Impact On Smaller Banks 

The increased need for investments in technology and staff to handle real-time transactions could potentially disadvantage the smaller banks. 

The rationale behind this belief is that institutions may have limited resources to meet the additional technological demands from a FedNow system. This may potentially lead to daily stresses in operations in both human resources and financial capabilities.

Which Banks Are Using FedNow?

The largest players that have adopted the FedNow service include major banks such as JPMorgan Chase, Bank of New York Mellon, US Bancorp, and Wells Fargo. Additionally, there are 35 early-adopting banks and credit unions, along with the U.S. Department of the Treasury’s Bureau of the Fiscal Service. 

These institutions are among the first to have access to the instant payments capabilities through the FedNow Service. It is worth noting that the Federal Reserve plans to onboard more banks and credit unions later this year, with the ultimate aim of including all 10,000 U.S. financial institutions. 

FedNow Vs. SWIFT

The primary difference between FedNow and SWIFT is in their scope and purpose. At its core, FedNow is a system to make real-time payments between institutions whilst SWIFT is a messaging system to facilitate the transfer of money globally.


FedNow is a payment system operated by the United States Federal Reserve Banks, facilitating electronic funds transfers between financial institutions within the United States. 


In contrast, SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a messaging network used globally by financial institutions to securely send and receive information, such as money transfer instructions, across borders. 

SWIFT does not directly facilitate funds transfer but enables communication between banks to settle international transactions.

Is FedNow A Central Bank Digital Currency?

No, the FedNow Service is not a central bank digital currency (CBDC). The FED has confirmed that FedNow Service is a payment service designed to facilitate faster and more convenient payments between banks and credit unions for their customers.

The FED has also made it clear that the issuance of a CBDC is a separate matter. The central bank has not made any decision regarding the issuance of a central bank digital currency (i.e., digital dollar) and any such move would require authorizing legislation from Congress.

FedNow’s Impact On The Payment Landscape

The real-time nature of the system will promote innovation and competition in the banking industry, leading to the development of new products and services that leverage instant payments. 

As financial institutions adapt to this transformative payment system, they will need to ensure they are equipped to handle the increased demand for real-time transactions and take advantage of the opportunities that FedNow brings to the market. 

As FedNow becomes more widely adopted across financial institutions, it is likely to revolutionize the way payments are made and received, fostering a more dynamic and customer-centric ecosystem within the payments industry 


The real-time nature of the FedNow system aims to foster innovation and competition in the banking industry. In essence, financial institutions must adapt to this transformative payment system and equip themselves to handle the increased demand for real-time transactions, seizing the opportunities that FedNow brings to the market. 

With FedNow’s continued expansion and onboarding of more banks and credit unions, the vision of ubiquitous access to real-time payments will become a reality, shaping a future of faster, more efficient, and accessible payment services in the United States.


What is FedNow? 

FedNow is a new interbank payment system developed by the United States Federal Reserve Banks (FED) that offers real-time gross settlement (RTGS) services and operates 24/7 365 days a year.

Will there be a FedNow app for me to use?

No, the FED does not offer a FedNow app or provide direct payment services to consumers and businesses.

Does the Fed have access to my bank account with the FedNow Service?

No, the FED does not have direct access to individual bank accounts with the FedNow Service. 

How accessible is FedNow?

Unlike popular private money-transfer platforms, FedNow services are exclusively accessible through banks or credit unions, not directly through third-party apps or websites like PayPal.

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