The Federal Reserve said on August 5, 2019 that it would build FedNow, a round-the-clock payment and settlement service intended to let banks of different sizes offer faster payments. The Board expected availability in 2023 or 2024, subject to industry engagement. For a small business, this was a plan for moving money between banks—not a payment option it could switch on that day. [S2][S3]

The proposed service would handle transfers initiated by the sender, including bill payments and smaller business-to-business payments, within seconds. Its initial transaction limit would be $25,000. Settlement would move money between banks’ accounts at the Reserve Banks; participating banks would then have to make the funds available to their customers immediately after receiving settlement notification. The $25,000 figure was a proposed ceiling, not a promised allowance for every business. [S3]

That timing matters when a sale has been made but the proceeds cannot yet pay for the next delivery. In her announcement-day speech, Governor Lael Brainard argued that immediate access to sales receipts could help small businesses pay suppliers without costly short-term financing. This was a potential cash-flow benefit, not a finding that FedNow had reduced borrowing costs. The distinction matters for a merchant comparing payment arrangements: receiving a payment and having spendable funds are separate questions. [S2]

Brainard presented the Federal Reserve’s existing connections with more than 10,000 banks as a way to extend real-time payments beyond the institutions best placed to build their own connections. She also argued that competition could improve service quality and lower prices over time. Those were her reasons for adding a public-sector alternative, not evidence that merchants would receive lower fees. [S2]

Connecting the services remained unsettled. Brainard said direct exchanges between different payment services were one possible route to broader reach, but it was not yet clear whether interoperability would be an initial FedNow feature. The Board’s notice separately warned that nationwide reach would take longer than initial availability. A launch date alone therefore would not establish that a merchant could receive payments from every customer’s bank. [S2][S3]

The customer-facing work would still sit outside FedNow. The proposed payment sequence began with instructions through a bank’s own end-user interface; banks would remain responsible for debiting and crediting customer accounts and notifying customers. The Board also said banks could set customer transaction limits below the proposed $25,000 service ceiling. A business assessing the future service would need its bank’s terms, not just the Federal Reserve’s headline limit. [S3]

Source documents

  1. Delivering Fast Payments for All — Governor Lael Brainardhttps://www.federalreserve.gov/newsevents/speech/brainard20190805a.htm
  2. Federal Reserve Actions to Support Interbank Settlement of Faster Payments — Docket OP–1670https://www.federalreserve.gov/newsevents/pressreleases/files/other20190805a1.pdf