The FedNow Service itself is the tip of the iceberg in terms of what actually happens from an end-to-end perspective.
We've been working to become a Certified Service Provider so feel free to ask me anything. I'm happy to share anything that is not under NDA.
Like: Do developers spin up entire fake economies with two banks and the fed on their latop, or is it all incremental changes to individual microservices in a big permanent test setup? Do other banks / service providers / the fed run test instances of their systems with fake money for other companies to do interop with, like a "global test financial network", or do you generally test with "real" money?
What do you see on your screen in day to day developer live? Are there like dummy online banking web interfaces? Or is it all text logs?
Is it just normal software development like anywhere else, or is there anything that really sets it apart in terms of developer workflow?
Meta-questions that you quite possibly can't answer: broadly speaking, what parts of this system are under NDA? Why would any part of this system be under NDA? Did any government agencies impose the NDA, or was it private companies? Is the NDA intended to protect those running the system, or is it intended to protect those using the system (IOW, is it security by obscurity)?
If I am a service provider, and want to use the FedNow service to power one of my offerings, how can I get started with that?
How will this eventually benefit consumers beyond what Zelle currently provides?
I think that it's a pretty handy format to be familiar with, and is quite simple to work with too.
If the Fed or participating banks decide to open up the system like European banks have done so, it can be handy to get familiar with it for us financial hackers out there!
Thanks!
Wish we could do the same for the credit card companies. Would be great if the Federal Government could intervene in some way to have Visa / Mastercard / American Express / Discover use the same API interface for payments. Would dramatically increase competition for providers.
Not really. All it will do is let the same companies change the way they handle average citizens' payments.
It's the same as Open Banking in Europe. It is supposed allow small businesses to leverage this to enable innovation and all that stuff, but when you want to use these APIs you find there are limitations on who can actually use it. For example, you can only put your service to production by being on a "directory" of approved providers, and to be on that directory you need something 25k or 50k in an account. So, not really that useful for a small startup wanting to make a product out of it.
Banking systems are the backbone of world power dominance, big players won't let small people share it.
There is probably a neobank opportunity in providing this. FedNow is, reasonably, administered by banks. (The Fed doesn't want to provide end-user customer service nor incur liability for fraud.)
If FedNow can fit in with ApplePay, then it can displace credit cards in the first place! The corollary I’m drawing, is from India where “UPI” payments (something similar to FedNow) was launched about 7 years ago and today is the more dominant payment mode than credit cards.
The network of banks supporting FedNow is still small, so we may not see meaningful payment volume for a while compared to ACH, Wires, Checks, etc.
A bank does not want to interact with you in the same channel as it interacts with another bank.
What there will be are services provided by banks which utilize this for instant transfers.
The middle companies between transfers you want. Most of the actual work is fraud prevention and dispute resolution... unless you want the only means of settling a dispute is through the courts.
FedNow can replace credit cards for cases where chargeback or actual credit isn't necessary. So for many ordinary cashless payments.
Arguably even for many cases (small to medium amounts of money) where the possibility of chargeback seems useful FedNow could be better in expectation, because the fees are lower. The credit card companies are making money after all. Using them for chargeback is like buying insurance for things you can replace out of pocket: On average, you make a loss.
however, the payment itself is almost besides the point. the tricky part is the scheme / governance surrounding payments. who is liable for what, preventing fraud, etc. these large payment actors + the middlemen are more about fostering trust networks than moving the actual dollars and cents.
fraud in P2P payment networks (e.g. Zelle) is already a huge issue because a lack of a governing actor like a card network.[0] a different question is would the government ever provide this mediating role / lay out guidelines? would we want it to?
https://www.nytimes.com/2022/03/06/business/payments-fraud-z...
Far too much lobbying for any REAL competition to shake up the industry.
This will be exclusive to the federal government and state governments I imagine.
For e-commerce, isn’t that SRC?
https://www.emvco.com/emv-technologies/secure-remote-commerc...
Those middle companies have lobbyist representation and the govt has no intention of cutting any companies out of the payments industry.
I have no idea about fednow but you can directly transfer an unlimited amount of USDC to someone in about a second for $0.0025 right now on Solana.
For those who are commenting about payment systems in India and comparing this to UPI (Unified Payments Interface), this is not like UPI in a few ways.
Firstly, this is more closer to a faster version of RTGS (Real Time Gross Settlement) in India, which is operated by the RBI (Reserve Bank of India). Speaking from experience, RTGS in India can take several minutes or even 20 minutes or longer, belying the “real time” in its name (this is true even now). The FedNow system is supposed to be real time (we’ll soon know how well it performs in comparison).
Secondly, UPI is a payments system by a consortium called NPCI that’s owned by private, public and foreign banks in India. It is not owned by RBI. FedNow is owned by the Federal Reserve, and not by a bunch of banks.
With both RTGS (and the slower batched transfer system called NEFT) in India and FedNow in the US, the interbank settlement is done via the central bank (RBI or Federal Reserve).
Anyone with an euro bank account is probably using TIPS in some fashion. In most cases, you can send a bank transfer anywhere in the euro area within 10 seconds for zero fees. Some banks may charge an extra fee on the sending side, and the receiving side might be a bit slower (in which case the payment might take a few hours to show up or act like a normal bank transfer). It's also used by merchants like Amazon or payment systems like PayPal to reduce fees on their payments.
Sorry I have to ask. What do you think the Federal Reserve is?
Is it an app FedPayPal/Fedmo that I will be able to use for sending funds? Is it something that will be used by other apps to have cheaper funds transfer? Because if it is latter then I'm afraid that entrenched players will just keep doing what they're doing, keeping the profits but offloading processing to that system if it will be cheaper.
The fees by Paypal/Square/Stripe even Visa and Mastercard are enormous. Personally, I strongly believe that if one will dig deep enough he will find cartel there that sets prices. And when that will happen, LIBOR scandal is going to be a kindergarten play.
Laypeople are not the target audience for this, payment rail users are (i.e. entities who regularly utilize ACH/wire transfers or build services on top of them).
Now, obviously there are various competing services for this kind of use case already: Venmo, Cashapp, Zelle, etc. So maybe it won't be better enough to feel like an improvement, but that's the aim.
> Will there be a FedNow app for me to use?
> No. There is no FedNow app. The Federal Reserve does not provide payment services directly to consumers and businesses. Banks and credit unions can provide their customers with access to instant payments through new features on their mobile apps, banking websites, or other interfaces such as those used for business payments. Bank and credit union customers will probably not even see the name "FedNow" on their bank's instant payments platform as the FedNow Service is the high-speed highway that helps payments move from one financial institution to another. Banks and credit unions build new products for their customers that connect to the highway.
https://www.federalreserve.gov/paymentsystems/fednow_faq.htm
https://www.frbservices.org/binaries/content/assets/crsocms/...
In Switzerland we build an awesome eBill system ontop of the equivalent thing to FedNow. Its all run by Six Group which is the biggest Stock Exchange but it is jointly owned by the big banks and government. So they all agreed to add this eBilling system. Its so much superior to having paper come in the mail all the time.
So much is possible once you have instantly confirming transactions supported by all banks. Suppliers can assume all possible customers have a bank account that can do this in contrast to the crazy world of sending paper checks by mail.
I wish I, and anyone else, could get a bank account directly with the federal reserve bank.
> According to a 2021 report by the Federal Deposit Insurance Corporation (FDIC), an estimated 7.1 million adults in the United States do not have a bank account. This number represents about 2.4% of the adult population.
You could even place limits to "child-proof" such accounts. I'd be ok with not allowing the account balance to get below zero or exceed the FDIC insured limit. My only condition is nobody should be banned from it or kicked out for any reason. You could say this account earns no interest (as long as there are no account maintenance fees or transaction fees).
Given Stripe's role in the system, it doesn't make sense for them to support it until there's sufficient support from the banks as well. Until banks support it, it doesn't matter if Stripe (or any payment platform) does, because the users won't see any benefit.
> Driving the news: "We're tracking it closely," President of Product and Business Will Gaybrick says, noting the company is not actively working on anything related to FedNow. "I really do think real-time payments are going to be a big deal."
> "As I understand FedNow, there isn't yet a mandate, so banks don't have to implement it," he added. "For things to completely change the landscape of payments, you need universal coverage."
> If, for instance, only 30% of banks support FedNow, then it's unlikely to become a priority for merchants to adopt the system.
https://www.axios.com/pro/fintech-deals/2023/06/14/fednow-st...
> The Financial Technology Association, which represents fintechs including Block, Marqeta, Stripe and Wise, among others, is urging the Fed to make direct access to the new faster payments system, called FedNow, more widely available so fintechs can tap the new service without going through banks.
> Generally, only licensed banks have access to the Fed’s master accounts, giving them clearance to use FedNow’s faster payments system when it’s available, but nonbank fintechs argue it’s shortsighted to exclude them from the same direct access to the new public system. While there is also The Clearing House’s rival RTP Network, the new FedNow system may provide more cost-effective services.
https://www.bankingdive.com/news/fintech-federal-reserve-pay...
Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
* Any IBAN from a SEPA country, at least.
> Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
No, under the hood it's a government Blockchain
No. A possible CBDC rails in the US is nothing to get excited about. Unless you want savings limits and expiry dates on your money.
> Is this akin to government-backed Venmo, or something?
Yes, but even worse.
Fixed this for you.
I don't really want a gigantic federal agency having insight into every financial transaction I make. Hard, fucking, pass.
CBDC really isn't a big issue either, because it almost certainly won't happen. Americans are very unlikely to want a system like that.
Arguably the US government effectively has these powers today, but beingtthat they don't directly own our banks there is a level of red tape they have to go through. As long as they are technically separate there is also the opportunity for us to change the laws and strip them of that access, once combined we give up that possibility.
The US was originally design with a very strong distrust of our own federal government. For the last 80 years we've completely flipped the script and given more and more power to a massive federal government, but the undertone of distrust is still around for quite a few Americans.
* the Biden administration is planning to monitor smaller denomination transactions (in an inflationary environment!)
* IRS resources historically and presently target low-income, low-wealth households/individuals for audits
https://www.cnbc.com/select/irs-600-reporting-rule-delayed/
https://www.cbsnews.com/news/irs-audit-eitc-five-times-as-li...
https://medium.com/beyondmoney/the-good-bad-and-ugly-of-cbdc...
https://medium.com/illumination/how-the-central-banks-digita...
Since free realtime payments presumably would still require both the sender and the receiver to use a participating financial institution, instead of all participants just transacting directly through the Fed, how is this supposed to work if most of the industry isn't participating?
nearly all banks in the US should support FedNow within the next few years, if not much sooner, as it is seen as tablestakes for most bankers.
Eventually they all got on-board and now money is sent in seconds between accounts.
It didn't replace credit cards or direct debit but it's the reason why nothing like Zelle exists in the UK.
There's also some added benefits like being able to withdraw money from Paypal pretty much instantly.
https://en.wikipedia.org/wiki/Unified_Payments_Interface
In December 2019, noting the success of UPI, Google suggested the US Federal Reserve Board to follow UPI as example in developing FedNow,[22] a real-time payment system for United States.[23]
it seems pretty well established that federally chartered corporations, like the USPS and Amtrak (e.g., https://en.wikipedia.org/wiki/Lebron_v._National_Railroad_Pa...), are bound by the first amendment, so theoretically the Fed should be as well.
That means the usual "it's a private corporation!" defense of corporate censorship is probably off the table.
However, I think I'll have less of an issue for it if there's the government-backed means in which to send them money; at that point I think the "it's a private company!" defense would actually apply to the credit card companies.
Then you have Obama with https://en.wikipedia.org/wiki/Operation_Choke_Point trying to circumvent the Congress and the Judiciary.
The reason the US government has a national debt is because that debt is owed to the Federal Reserve, which is a private bank that loans the US government money and that sets the US monetary policy.
Yes, they also offer fraud protection and chargeback, but in 90% of purchases, I don't need those. I have other means of establishing trust and recourse, and I just want to send money, instantly.
Paying $200 on the internet should cost $0.01, not $10.00.
I think there is tremendous opportunity in unbundling payment and fraud protection.
I'm someone who (still!) believes in the Bitcoin project but I'm hesitant to use it for online payments because if someone rips me off there's no one I can go to for help.
Example 1: Sell a graphics to someone on /r/hardwareswap. Currently using PayPal.
Example 2: Sell car in-person. Currently go to bank and have buyer hand over cash to deposit in bank.
That's how it works in pretty much the entire rest of the world. PayPal is mostly incomprehensible to Europeans, it solves a problem that they never had.
What people are accusing them of is taking steps toward creating a digital dollar. This is their response, which is pretty mealy-mouthed if it's meant to address those accusations. A better way to express a denial would be "the Federal Reserve has no intention of creating a digital dollar and is not planning for nor working on that project," if indeed that is true.
Because if they DO create one in the near future, then this product SHOULD be designed as a step toward that. If they create a digital dollar and it uses any version of FedNow, then they're liars. If they create a digital dollar and it uses an entirely different product, they're incompetent.
The CBDC is still planned. But way far in the future (couple years, at least). And why wouldn't it solve settlement itself?
FedNow is shipping today. If it is not the future solution, that is fine. It gives us better performance now.
If if that were true at this instant, they could change it at whim.
What is really needed is a constitutional protection of privacy.
Unfortunately its a big target for scammers. Once the cash is instantly transferred, there is little to no chance of getting it back. There are no chargebacks like with credit cards and the instant nature of it means payments can't be reversed like the old bank transfers.
So its good for sending money to friends, family and trusted people, but not so great for buying anything online as your protections are basically zero.
https://astralcodexten.substack.com/p/the-buying-things-from...
So I hope that the US gets to a place where it is secure and convenient to pay others bank accounts with the balance in your bank account - but I doubt it.
------------------------------------------------------------
The Federal Reserve announces that its new system for instant payments, the FedNow® Service, is now live. FedNow® FAQ:
>> https://www.federalreserve.gov/paymentsystems/fednow_faq.htm
------------------------------------------------------------
FedNow® Service Provider Showcase (Incl: Service Providers with APIs)
Browse service providers that can help you connect, innovate, and deliver instant payment products using the FedNow Service.
>> https://explore.fednow.org/explore-the-city?id=10&building=s...
------------------------------------------------------------
Participating financial institutions that are currently live on the service:
>> https://www.frbservices.org/financial-services/fednow/organi...
------------------------------------------------------------
Launch Video: https://www.youtube.com/watch?v=wHLnV9wu-5A
Other Official FedNow® Videos: https://www.youtube.com/@FRBServices/videos
We'll see if that actually happens.
What happens when you get paid? It comes several days later?
Regarding payment systems specifically, people generally don't realize what they're missing.
Pick anybody from anywhere and they'll tell you they've been able to do everything they ever wanted to do (with regards to payments) using the already-existing systems of their country.
This is like comparing candles and lightbulbs. Sure you can light up your home using both methods just fine, but you end up realizing how inconvenient candles were once you've made the jump to the newer technology.
As an American, this definitely isn't true for me. I've found so many large organizations fail to make auto-pay work, transferring money is mind-bogglingly slow, and going from magnet to chip-and-pin instead of straight to tap-and-go was a regression. Some companies are able to bill you after you no longer wish them to bill you, while other organizations make it difficult to find out how much you even owe them in the first place when you want to pay them. Not sure how much the last couple can be solved with incremental tech.
Anyway I have a theory: big countries are too far up their own ass to notice or care what the rest of the world is up to.
Compare a small, international oriented country like the Netherlands or Denmark to sleepy provincial Germany.
I thought FedNow was explicitly inspired by the success of India's UPI?
Articles seem to imply that it can work in complement to zelle, so that may extend it’s reach quite a bit, no?
Why would a for-profit banking institution actively advertise for something that will affect its bottom line (e.g. transfer fees)..?
The very fact that we have money that can appear to be yours initially, but then removed from your account if a check is reversed or disputed is costing people in time and $, and benefitting fraudsters. (advance fee fraud, Zelle "mistakes", and similar). 3 day clearing times that give people an opportunity to be scammed.
Although, irreversible + instant payments may open some new types of problems for people, I could totally see that. But people will need to learn how to deal with this more rational system. Other countries are decades ahead of us in that you are the one who has to initiate payments from your account, and only you can do that, and payments are instant and settled.
IIRC India has relatively high tax rates, but has struggled with collection in the past -- maybe I'm being overly paranoid, but UPI seems like the perfect mix of usefulness and convenience to get everyone hooked, then once it's widely adopted enough (let's say 80/90%+ of payments) a sales tax could be enforced.
I don't know the specifics of how much identification UPI requires, but you could levy all sorts of taxes that way if you knew who was who.
I think this is a case where setting a standard and requiring payment processors to adhere would have been a much better idea. More centralizing of power is not what we need right now.
e: ah I see the diagram now. more helpful.
[0] https://rollcall.com/2020/06/16/feds-powell-urges-congress-t...
The main problem stopping the government from giving you money is that it doesn't know where you'd want them to send the money to.
When I started dating my wife, she called me an old man for even owning a cheque book. That was in 2006.
Real ID + needing it to browse anything on the Internet: https://community.qbix.com/t/the-coming-war-on-end-to-end-en...
From what I see people on HN writing, by and large they downplay the risks of these as well as AI. Or alternately seem to suggest that CBDCs and national IDs are not coming, and that it’s a conspiracy theory. However, the “enshittification of Big Tech platforms” is already a fact, so they simply complain about it, but anytime solutions involving open source, decentralization, and utility tokens are introduced, they are violently voted down. So — since no solutions are welcomed, I guess many denizens of HN support hurtling toward extreme centralized control. After all, we’ll be able to complain about it once it’s in place, and that’s enough!
Edit: literally 5 seconds after I posted it, I received downvotes. Not fast enough for a human to read the message let alone explore the links. I wonder if it’s even automated by keyword now.
Similarly with digital payments, I'd much rather trust the government with that than some rando cryptobro of the week.
There is nothing extreme about this. The government already does both functions in the analog world. It's about time they caught up digitally.
Meanwhile some YouTuber screeching about some Bible quote... not a convincing start
Edit: didn't downvote you btw, just don't agree that this is a bad thing
Nobody has seriously discussed a CBDC for months in the U.S. FedNow is the American financial system catching up to the 1990s. It has nothing to do with crypto beyond the cursory.
>Here we go. CBDCs are next, and also national Digital IDs
No, this is a long term replacement for ACH, a function that the Federal Reserve was already carrying out.
In the demos I watched, There is account number and routing number
https://www.aba.com/advocacy/our-issues/cannabis
It looks like a recent proposal to fix this (the SAFE act) is politically stalled:
https://www.politico.com/news/2023/07/14/weed-banking-safe-b...
Come on... Being capable of sending money to someone easily should not be based on the bank.
Here's a list of countries with similar payment systems
I never touched a check in my life and I get my employers payment mostly even before the end of the month?
Furthermore any end user interface provided by the bank could have its own limit, since FedNow is just a backend service, frontends are up to each participating provider.
So easy to undercut the vast network of middlemen involved with using credit cards and debit cards.
[0] https://en.wikipedia.org/wiki/Unified_Payments_Interface
Yet, India is already working on E-RUPI [0] which is a CBDC on top of UPI by the Reserve Bank of India, also shown in the same Wikipedia link you just used. Eventually, FedNow will just be the rails for a US dollar CBDC.
The next time a protest happens in India after their government does something extremely unpopular, you'll see why CBDCs are a nightmare not to be ignored. This is why governments around the world are working with many central banks with pilot schemes to test them out and eventually roll their own.
> Like a Zelle or Venmo, but government backed!
Look where that went for Zelle. [1] A vehicle for rampant fraud on the system.
[0] https://indianexpress.com/article/explained/what-is-e-rupi-d...
[1] https://www.nytimes.com/2022/03/06/business/payments-fraud-z...
> Because UPI is designed to be intermediated by computers rather than by humans, transactional information gets captured by the payments company while the transaction is in progress, and that can tell the clerk (or cron job) that the payment succeeded without them needing access to the bank account.
> This is a fun engineering challenge in many countries, which are often overlaying bank transfers as a payment method on top of bank transfers as a settlement method.
[…]
> Bank transfers are an extremely small percentage of customer-to-business payments in the U.S. In addition to the speed issue, which might get improved by FedNow when it launches (wags have referred to it as FedLater), bank payments have no consistent way to receive metadata, and despite being no-cost they compete with well-developed credit card ecosystems which credibly offer better-than-free pricing through rewards schemes (to the customer, who generally gets to choose which payment method they use to transact).
https://www.bitsaboutmoney.com/archive/bank-transfers-as-a-p...
> No. There is no FedNow app. The Federal Reserve does not provide payment services directly to consumers and businesses. Banks and credit unions can provide their customers with access to instant payments through new features
See y'all in another 25 years, when banks get around to implementing this.
It seems to me like a government run shoe factory, or a government run mail service.
