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Everything you need to know about FedNow

Everything you need to know about FedNow

Aug 22, 2023

In July 2023, the US payments space witnessed a major milestone – though it’s one that, unless you were looking carefully, you just might have missed.

We’re talking about FedNow – the Federal Reserve’s new payments service which allows businesses and consumers across the US to make, and receive, real-time payments.

But what is FedNow, exactly? Is it the same as PayPal or Venmo? Who can use it, which banks support it – and could it be poised to replace cash entirely?

Read on to find out.

What is FedNow?

Launched in July 2023, FedNow is a real-time payments service backed by the Federal Reserve.

The service allows customers at participating banks the ability to send and receive instant payments – with the funds appearing in the recipient’s account within seconds. FedNow joins the Federal Reserve’s existing suite of payment services, including FedACH and Fedwire. 

FedNow isn’t restricted to weekdays, holidays, or by the bank’s opening hours, either – it’s available 24/7, 365 days a year.

How FedNow works

FedNow works by making two key parts of the payment processing lifecycle – authorization and settlement – instant.

Whereas other popular forms of account-to-account (A2A) payment – such as Automated Clearing House (ACH) transactions – can take days for settlement to complete, FedNow payments go through in real time. There’s no ‘batching’ of transactions (where banks and payment service providers process payments in bulk, rather than individually; batching is cost-effective, but slow), which speeds the whole process up.

At the moment, FedNow is limited to domestic payments between banks in the US. It doesn’t support international payments – for that, try a wire transfer instead.

Why is FedNow different from other payment methods?

While it’s easy to liken FedNow to the payment methods you’re already using to move money – such as ACH, wire transfer, PayPal or an alternative – it’s actually a different beast entirely.

FedNow vs ACH

Even if you haven’t heard the term, chances are you’ll have made plenty of ACH payments. They’re the most popular account-to-account payment method in the US: and any time you’ve sent money to a friend, received your wages, or paid a utility bill, you’ll most likely have had the ACH network to thank.

The only issue? It’s slow. As we touched on above, ACH payments can take days to go through. (Even Same Day ACH, introduced in 2016, can still require several hours to process.)

By offering real-time payments, FedNow aims to offer consumers a more rapid alternative to ACH. That said, FedNow isn’t designed to replace ACH entirely – and, in the long-term, the Federal Reserve has plans to ensure the interoperability of the two services.

Learn more: What is ACH debit?

FedNow vs real-time payments

This one’s a little tricky. Because, while FedNow does offer real-time payments, there’s still a couple of distinctions to be made between FedNow and real-time payments (RTP).

The first? That the networks they run on are operated by different entities.

The RTP network is owned by The Clearing House, a privately owned New York-based payments authority. FedNow, as we know, is a creation of the Federal Reserve.

The second difference? The transaction limit each payment method imposes. For real-time payments sent via The Clearing House’s RTP network, the limit is $1 million. For FedNow, it’s $500,000. (That said, the Federal Reserve sets the default transfer limit for banks at $100,000 to start with; banks can choose to lower this, or raise it to that $500,000 maximum.)

FedNow vs PayPal

Unlike PayPal and other peer-to-peer payments services, FedNow isn’t offered directly by a company, but through the customer’s bank (provided it has opted in).

Also dissimilar to services like PayPal and Venmo – which facilitate payments by acting as intermediaries between banks – FedNow payments settle directly in central bank accounts.

FedNow also differs from private peer-to-peer payments services in the way the customer pays. There’s no FedNow app or website – the customer will utilize their existing bank’s online infrastructure to login, pay, and gain full visibility over their payments.

Why is FedNow important?

FedNow is important because it increases access to real-time payments for everyday people and businesses in the US.

Real-time payments are, of course, already available as services through Venmo or PayPal. (And, as we’ve seen, through The Clearing House’s RTP network.)

But peer-to-peer apps typically charge their users through the nose for the privilege – and PayPal and Venmo’s transaction fees are already high. By contrast, FedNow costs the sender just $0.045 per transaction; and any request for payment incurs a fee of only $0.01.

As for FedNow in practice, what could it mean for the US’s consumers and businesses?

It could be paying your electricity or water bills instantly. Settling a debt with a friend or business immediately, and avoiding late-payment confusion or resentment. And receiving your wages in real time – not half a week after you’ve seen your payslip.

Real-time payments also make it easier for people to manage their money – especially those who are prone to slipping into overdraft, or ending up on the wrong side of late payment fees. 

As for businesses, FedNow enables them to get immediate access to funds when an invoice is paid, rather than having to wait days. This helps businesses – especially small ones – manage their cash flow, and maintain the steady access to working capital so crucial to SMBs’ survival.

Who can use FedNow?

FedNow is available to customers – including individuals and businesses – who bank with the financial institutions and credit unions involved. (FedNow is available to all banks in the US – they just need to opt in.)

Important to note is that both the sender and the recipient’s bank must have opted in to FedNow for the transaction to take place.

In the short-term, this comes with barriers (just 26 financial institutions are signed up so far). But in the long-term, as more banks come on board, it shouldn’t present any issues.

Unlike PayPal, Venmo, and other popular payment methods, customers can’t access FedNow directly – only through a financial institution. We’re breaking down which banks and credit unions are involved in the next section – so read on for the full list.

Where is FedNow available?

To gain access to FedNow as a payment service, you’ll need to be with a participating bank – i.e. one that’s opted in.

As of 23 July 2023, there are 26 participating FedNow financial institutions.

FedNow is also available with 11 settlement agents and liquidity providers, and 17 certified service providers. For the full lists, head to the Federal Reserve’s website.

Will FedNow replace cash?

No, FedNow won’t replace cash – and that certainly isn’t the intent.

Echoing this is a firm statement on the Federal Reserve’s website, which states FedNow is not “a step toward eliminating any form of payment, including cash.”

Even in 2023, where there are seemingly limitless ways to pay, cash is still an important payment method. Cash is particularly crucial when it comes to financial inclusivity, and ensuring marginalized demographics – such as the elderly or young people, or those with limited access to credit or a bank account – are able to send and receive money.

Is FedNow a central bank digital currency?

No – FedNow isn’t a central bank digital currency, nor is it related to one. It’s simply a way for banks and credit unions to enable their customers to make real-time payments.

On the topic of issuing a central bank digital currency, the Federal Reserve is staying tight-lipped. On its website, a statement reads:

"The Federal Reserve has made no decision on issuing a central bank digital currency (CBDC) and would only proceed with the issuance of a CBDC with an authorizing law. Testifying before the House Financial Services Committee in March 2023, Chair Powell said a CBDC is "something we would certainly need Congressional approval for.""

So, no word on a central bank digital currency yet. But FedNow certainly isn’t one.

FedNow: pros and cons

Still on the fence about whether FedNow is right for you? We’re breaking down the service’s biggest draw cards – and drawbacks – below.

FedNow pros:

  • No waiting to pay, or get paid! Transactions go through immediately, and the money is available in the recipient’s account instantly.
  • Low per-transaction fees (just $0.045 for the sender).
  • There’s no specific, dedicated app to have to download, set up an account with, and start paying through – you can do all this from your existing bank’s app or website.

FedNow cons:

  • Both the payer and the payee need to be with participating FedNow banks to be able to make a real-time payment through the service.
  • As of July 2023, just 26 financial institutions in the US have opted in. The service is still in its infancy, though – so there are promising signs!
  • It’s still new and untested, so the jury’s still out as to how much of a splash FedNow will make.

Is there a FedNow app?

Because FedNow is a service offered to banks – not directly to consumers – there’s no FedNow app, website, or other portal for customers to login to and send money through.

Instead, customers will access FedNow’s real-time payments service through the app or website of their bank. How this will look exactly depends on the specific bank – but it’s likely to be simple to locate and use through the bank’s online services.

Switch on the right payment methods with

Here at, we don’t offer FedNow right now. However, we do offer plenty of other payment methods your business can harness to take payments from your customers faster, more seamlessly – and in the payment method they’re most suited to.

From Apple Pay and Alipay to TrueMoney and Trustly, we’ll help you accept a range of international and local payment methods. Empowering you to switch on the right payment methods – and use them to drive business growth, increase your revenue, and bolster your brand’s burgeoning reputation.

Want to learn more about FedNow, and the future of real-time payments in the US? Explore our detailed deep-dive into the data, or reach out to our team for a chat about what can do to breathe new life into your business’s payment processing strategy.

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August 22, 2023 17:45
August 22, 2023 17:45