The Federal Reserve (Fed) Vice Chair Lael Brainard was part of an event to test their upcoming instant payment system, called FedNow.
The new payment solution is set for deployment between May and July 2023, as the government official confirmed.
Brainard participated in the FedNow Early Adopter Workshop, one of the initiatives working on developing the new U.S. payment rails along with the FedNow Explorer resource, community, and service provider showcase. These programs also aim at improving the levels of adoption for this upcoming product.
The launch date for the payment solution, as Brainard clarified, will heavily depend on the latter and on how fast banks, companies, institutions, and others update their payment infrastructure. This will require a “necessary investment”. The Fed representative said:
“The payment system is a critical part of America’s infrastructure that touches everyone. Americans rely on the payment system all day every day to make purchases, pay bills, and get paid—without ever needing to consider the complex infrastructure that is operating under the hood. American households and businesses want and deserve payment transactions that work seamlessly, reliably, and efficiently.”
In the United States, and other parts of the words, people often complain about traditional payment rails. When compared with alternatives, such as cryptocurrencies and stablecoins, legacy payment methods are slow, expensive, and often complex.
The Fed is trying to provide a new, efficient, safe, and “widely accessible payments infrastructure” with the FedNow initiative. In that sense, Brainard added:
“The FedNow Service will transform the way everyday payments are made throughout the economy, bringing substantial gains to households and businesses through the ability to send instant payments at any time on any day, and the funds being immediately available to recipients to make other payments or manage cash flow efficiently.”
FedNow Signals Inevitability Of Instant Payment Adoption?
According to the Fed representative, 2020 to 2022 global pandemic was a critical part of pushing the financial institution to update their payment infrastructure. Over the past years, people have demanded solutions that allow them to quickly settle transactions, and send and receive money from anywhere in the world.
This was allegedly one of the reasons why cryptocurrencies became more mainstream over this period: their technology allows people to transact at any time, from anywhere, without limitations. The FedNow system will aim at providing a similar service.
In that sense, Brainard claims that “real-time payments” are not just part of the financial future, but an inevitability in the United States as the country migrates to the era of digital payments. The government official added:
“The time is now for all key stakeholders—financial institutions, core service providers, software companies, and application developers—to devote the resources necessary to support instant payments. This means upgrading back-office processes, evaluating accounting procedures to accommodate a seven-business-day week”