U.S. government moving toward FedNow system
By Mike Ralph
For high plains news
A long-awaited FedNow instant digital payment system is expected to launch in July. The Federal Reserve Banks developed it to facilitate a nationwide reach of instant payment services by financial institutions on a 24/7/365 basis.
FedNow will be the clearing service for financial institute transactions to provide immediate payments to customers. FedNow is open to more than 10,000 financial institutions that operate within the Fed network.
Private money transfer applications such as Venmo and Cash App are not a part of that system.
This month, the FedNow system will be certifying participating banks ahead of the launch. Those taking part in the process have to complete a customer testing and certification program.
The Federal Reserve web site, Explore.FedNow.Org outlines the mission and future direction of service urging the participation of financial institutions. Richmond, Virginia Fed President Tom Barkin cited the system as resilient, adaptive and accessible.
However, the concept and its potential long-term consequences have its critics.
In a Dec. 15 article from Forbes magazine is titled “The Federal Reserve Should Drop FedNow And Any Plans To Launch A CBDC.”
A CBDC is an acronym for Central Bank Digital Currency. The article argues the Federal Reserve, i.e. the government, should not be running a real time payment system that has been historically run by private banks and that it will move in the direction of central banks controlling every aspect of money. As with FedNow, CBDCs both usurp the private sector, the article reads.
The Associated Press reported in March 2022, “The Biden administration is moving one step closer to developing a CBDC, saying it would help reinforce the U.S. role as leader in the world financial system.”
The report continued with “Biden issued an executive order calling on various agencies to look at ways to regulate digital assets.”
Treasury Secretary Janet Yellen is involved and is researching its impact on the environment, the report said.
Michelle Kalin, Chief Operations Officer for Adams Bank & Trust, said she has been attending training seminars on FedNow and that thus far there has been no mention of CBDC’s in the future of FedNow services with financial institutions.
Kalin added the currency used through FedNow digital payment system is backed by U.S. dollars.
The FedNow service is something of a new frontier in transferring money, and strategies to thwart fraud have been developed.
“Measures under consideration are monitoring frequency patterns or cumulative value over a period of time,” the FedNow site states.