Will the government seize your bank account? Venmo going away? FedNow explained.
The Federal Reserve’s new payment system, FedNow Service, is expected to launch this summer, promising a new way for people and businesses to send and receive money quickly.
The “instant payment” program has been in development for years, and some banks with large presences in Charlotte say they’re already gearing up to bring the system to their private and commercial customers.
And despite some claims to the contrary, the FedNow system is not part of a broader plan to eliminate current U.S. currency or give the federal government more control over your money.
Here’s what to know about the FedNow Service and when it will be available to those who bank with some of Charlotte’s biggest financial institutions.
What is FedNow? How will it work?
FedNow Service is “a new instant payment infrastructure developed by the Federal Reserve that allows financial institutions of every size across the U.S. to provide safe and efficient instant payment services,” the Federal Reserve says.
The “instant payments” will “allow individuals and businesses to send and receive payments within seconds at any time of the day, on any day of the year,” the group says, so “that the receiver of a payment can use the funds almost instantly.”
The service “will be available to depository institutions,” such as banks, “eligible to hold accounts at the Reserve Banks under applicable federal statutes and Federal Reserve rules, policies, and procedures,” though banks don’t have to participate in FedNow.
“Merchants, consumers, or non-bank payment service providers” will be able to use FedNow to send and receive money through their banks if their bank is part of the system “as they do today with other payment systems,” the Federal Reserve says.
Initial plans for the system were first announced in 2019.
When will FedNow become available?
“The initial launch” of FedNow is set for July, but the Federal Reserve has not announced an exact release date.
The service “will be deployed in phases,” with the first wave to “provide baseline functionality.”
Will Charlotte banks use FedNow right away?
Some major banks with large customer bases in Charlotte are already making plans for releasing FedNow once the service is available.
Wells Fargo is “ready” to launch in July after about four years of planning, according to Joe Hussey, head of Wells Fargo’s global treasury management payables and receivables department.
“What we’re really hoping for here is to really expand this product out to more users,” he told The Charlotte Observer, adding that the product will be available to individuals as well as businesses who bank with Wells Fargo.
Fifth Third Bank plans to “make the FedNow service available to customers later this year,” the company said in a statement.
“We will be piloting a limited rollout in the fourth quarter to a group of commercial clients,” spokeswoman Adrienne Gutbier said.
Charlotte-based Truist will be “sharing more about” its FedNow plans “later this year,” the bank explained.
Bank of America did not immediately return a request for comment from the Observer on its FedNow plan.
Will FedNow replace PayPal, Venmo or Zelle?
FedNow will be “slightly different” than other payment services such as PayPal, Venmo and Zelle, according to Hussey.
While those apps are typically used for person-to-person payments, such as splitting a tab with friends, FedNow will likely be used more for things like paying your utility bill or car insurance dues or transferring money between accounts you may have at different banks, he said.
Is FedNow a form of currency?
FedNow will not replace physical cash as currency in the U.S.
FedNow is a payment service, not a form of currency, and the Federal Reserve has repeatedly stated it is not getting rid of cash, the Associated Press reported.
The Federal Reserve has done separate research on potential digital currency, the AP added, but “that research is in its early phases and there isn’t uniform support among Fed officials for issuing such a currency.”
Will the government control your bank account through FedNow?
Some political figures and social media users have claimed that the Federal Reserve is developing programs, including FedNow, that will allow the federal government to track your spending and block purchases.
U.S. law does not allow the government to exercise that kind of surveillance or control, the fact-checking group Politifact reported.
There are “a variety of technical, legal and political reasons” why such a thing is impossible in the U.S., Politifact said.
