The Federal Reserve has kickstarted efforts to develop a new, round-the-clock real-time payment and settlement service. The envisioned “FedNow Service” would support faster payments in the United States, a Holy Grail for many banks and FinTech firms.
The Fed sees the offering as helping both individuals and businesses by eliminating the need for short-term credit to cover any gap in settlement. Faster payment settlements could help alleviate liquidity management issues for banks in particular, because settlement through the Federal Reserve does not involve liquidity or credit risk with respect to it as the settlement institution.
