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What You Should Know About the Federal Reserve’s New Instant Payments System

BY Spectrum Wealth Management | May 15, 2023

The use of mobile payment apps and person-to-person (P2P) payments are more popular than ever, giving businesses and consumers the ability to send and receive money instantly. According to a recent study, the share of P2P payments made with mobile apps nearly doubled in one year, increasing from 15% in 2020 to 29% in 2021.1 In response to the growing demand for these types of instant payments services, the Federal Reserve will be launching its own real-time, instant payments system called the FedNow Service (FedNow).

What is the FedNow Service?

Payments between depository institutions (e.g., check and ACH transfers) typically require “clearing” and “settlement” and can sometimes take a couple of days to process. The FedNow Service will change that by providing interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time, around the clock, 365 days a year. By participating in the FedNow Service, financial institutions will be able to process funds instantly. 2

How can the FedNow Service benefit consumers?

The Federal Reserve hopes that this new, more efficient instant payment system will facilitate and encourage economic activity by making it faster and easier for individuals and businesses to pay for goods and services. By having immediate access to funds, businesses and consumers will have greater financial flexibility, especially when making or receiving time-sensitive payments. In addition, the FedNow Service can reduce the risk to consumers of incurring overdraft and late fees and allow businesses to gain better control of their corporate budgeting and cash flow management. 3

Who can use the FedNow Service?

The FedNow Service will be available to all U.S. depository institutions, such as banks and credit unions. Businesses and consumers will be able to access the FedNow Service through their depository institution and send instant payments through their bank and/or credit union accounts. The FedNow Service will offer depository institutions the flexibility to choose from a combination of participation types within the FedNow Service in order for them to meet their specific business needs. Although some depository institutions are already preparing to adopt the system, others will need to explore an implementation and participation strategy, and some may decide not to participate.4

When is the FedNow Service scheduled to take effect?

The initial launch of the FedNow Service is scheduled for July 2023. Additional features and service enhancements will be released over time in phases. 5 For more information, visit


1. The Federal Reserve Bank of San Francisco, 2022

2. The Federal Reserve, 2023

3. The Federal Reserve, 2023

4. The Federal Reserve, 2023

5. The Federal Reserve, 2023

Spectrum Wealth Counsel, doing business as Spectrum Wealth Management, LLC, is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Additional information about Spectrum’s investment advisory services is found in Form ADV Part 2, which is available upon request. The information presented is for educational and illustrative purposes only and does not constitute tax, legal, or investment advice. Tax and legal counsel should be engaged before taking any action. The opinions expressed and material provided are for general information and should not be considered a solicitation for purchasing or selling any security.