Excellent John K. Kumi is a cryptocurrency and fintech enthusiast, operations manager of a fintech platform, writer, researcher, and a huge fan of creative writing. With an Economics background, he finds much interest in the invisible factors that causes price change in anything measured with valuation. He has been in the crypto/blockchain space in the last five (5) years. He mostly watches football highlights and movies in his free time.
It is important to note that FedNow is not a blockchain-based product like Cosmos, Monero, Polkadot, or Bitcoin.
FedNow has over the past few years appeared in the same conversation with the Central Bank Digital Currency. As experts attempt to point out the better option among the two, many have already vouched for FedNow as they await the launch of the much-anticipated instant payment system. In a virtual speech on August 29 to the early adopters, Fed Vice Chair Lael Brainard disclosed that FedNow would be launched between May and July 2023.
“The payment system is a critical part of America’s infrastructure that touches everyone,” he said.
The FedNow system is expected to provide a better and more cost-effective service compared to the existing payment systems. According to Merchant Maverick, merchants spend an average of $0.23 each time they swipe a debit card. Interestingly, FedNow would cost only a fifth of that amount to process transactions. It is important to note that FedNow is not a blockchain-based product like Cosmos, Monero, Polkadot, or Bitcoin. It would not also operate as a Central Bank Digital Currency (CBDC). It would largely rely on third parties to operate.
“The shift to real-time payment infrastructure requires a focused effort, but the shift is inevitable,” said Brainard.
Fed would provide the platform to banks to build and create payment features in existing or new products. It is also expected to operate as a consumer-to-business, business-to-business, or consumer-to-consumer depending on how it is implemented.
“Immediate availability of funds could be especially important for households managing their finances paycheck to paycheck. Having the capacity to manage money in real-time could help households avoid costly late payment fees,” said Brainard.
He further stated that they have been working to deliver on time. Also, the accessibility of this service by businesses and households would depend on how financial service providers upgrade the payment infrastructures.
Consumers are hoping that FedNow would be interoperable unlike some of the existing payment systems. In this case, the payment apps and banks of individuals would not matter. However, this would also be dependent on the Fed’s partners.
The Federal Reserve Board finalized the rules that will govern transfers over the platform in May. The rule also provides legal certainty and clarity on the rights and obligations of parties.