The Federal Reserve is rolling out new details for the FedNow instant payments service scheduled to launch in 2023, touting it as a tool that businesses owners and individual consumers will want to use — and participating financial institutions will want to offer.
On average, according to Fed material promoting FedNow, which is scheduled to launch in 2023, a consumer pays eight bills per month.
“That might seem like a lot, but rent, utilities, student and other loans, streaming subscriptions and the occasional doctor’s office visit do add up,” a recent promotional piece states. A pain point for consumers and businesses alike, the piece continues, is that current clearing processes often require scheduling a payment at least two days before it’s due.
Instant payments, the Fed states, will allow payments that clear immediately and can be sent any time day or night.
A data point cited by the Fed is that customers pay two-thirds of bills through one-off transactions, despite the simplicity of setting up recurring bill payments.
“While this might happen for a variety of reasons, one reason for some consumers is uncertainty of funds in the account and the need for flexibility to control the timing of their payments,” the Fed piece states.
The piece goes on to assert that customers are likely to find making instant payments preferable because they’ll be easy to execute and simple to reconcile with bank accounts that might not contain much buffer.
The FedNow creators also state that a major benefit of instant payments will be the capacity for billers to send Request for Payment and for customers to easily send funds in response.
While development of the FedNow system continues, businesses and consumers already are embracing existing real time payment options. The Clearing House’s Real Time Payments service is used by more than 100 financial institutions, according to TCH’s website. They range from small institutions to giants including as Bank of America, Bank of New York Mellon and JP Morgan Chase.