The U.S. Federal Reserve has announced the launch of its FedNow Service in July, the apex bank confirmed in a release on Wednesday. Instant payment options have usually followed a CBDC trial in several countries.
The FedNow Service seeks to make it easier for financial institutions of all sizes and locations to offer instant payment services nationally, around-the-clock, 365 days a year.
What are FedNow Payments?
Tom Barkin, president of the Federal Reserve Bank of Richmond and FedNow Program executive sponsor, noted, “With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible.”
As per the description, businesses and individuals will be able to transmit and receive instant payments with FedNow. The transactions can occur at any time of day through the financial institutions part of the service.
Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, urged more participation by the banking institutions. Montgomery stated, “We couldn’t be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution.”
According to global data, the instant payments ecosystem was valued at $100 trillion in 2021. And Asian countries like India and China are leading the sector, with the U.S. slightly late to join the club.
India employs a payment infrastructure based on the Immediate Payment Service (IMPS) and Unified Payment Interface (UPI) to offer instant payment services to customers and merchants. Global data show India is the most active market, with transaction volume hitting $39.8 billion in 2021. With that, India has expanded its e-rupee pilot as part of its CBDC trials.
China, which ranks second in that category, has widely used Alipay and WeChat for instant mobile payments. The nation has also pushed to adopt a digital yuan as its centrally-backed digital currency.
Could it Accelerate a CBDC Integration in the U.S.?
Instantaneous digital transfers frequently feature financial inclusion promotion. Additionally, they facilitate domestic market payments before enabling cross-border money transfers in various currencies. FedNow also comes with these expectations.
However, as web3 advances, central banks are promoting CBDC stories in the subsequent era of instant payments. Despite expectations that CBDC could usher in the era of instant payments, U.S. critics mock it as the “Biden coin.” CBDCs have caused quite a commotion after Republican Senator Tom Emmer launched an Anti-Surveillance Act to expand the right to financial privacy.
In this month’s release, the U.S. Treasury noted that the CBDC Working Group is creating an initial set of findings and suggestions. Meanwhile, a decision on its adoption is still pending despite the FedNow launch being months away.
The U.S. Depart of the Treasury stated that it aims to guarantee that a central bank digital currency would work safely and effectively with the current financial infrastructure. They also said that the group is focusing on promoting financial stability and the financial system’s integrity while promoting innovation.
Meanwhile, U.S.-based Ripple is in talks about CBDCs with more than 20 central banks globally. The XRP Ledger and RippleNet are powering several CBDC initiatives, but the U.S. is excluded. This is as Ripple prepares for the final months of a court fight with the securities regulator SEC.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.