The Federal Reserve has announced plans to develop a new round-the-clock real-time payment and settlement service, called the FedNow Service, to support faster payments in the United States.

A statement from the central bank explained that the rapid evolution of technology presents a pivotal opportunity for it and the payment industry to modernise the nation's payment system and establish a safe and efficient foundation for the future.

The Federal Reserve stated that it believes faster payment services, which enable the near-instantaneous transfer of funds day and night, weekend and weekdays, have the potential to become widely used and to yield economic benefits for individuals and businesses.

"Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community," said Federal Reserve board governor Lael Brainard. "FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers."

In 2018, the Fed’s board requested public comment on potential services that could be developed to support faster payments. Of the more than 350 comments that took a position on whether it should develop a new service for faster payments, over 90 per cent supported the Federal Reserve operating a round-the-clock real-time payment and settlement service alongside services provided by the private sector.

The board is now requesting comment on how the new service might be designed to most effectively support the full set of payment system stakeholders and the functioning of the broader US payment system. It anticipates the FedNow Service will be available in 2023 or 2024.

In addition, the board announced its intention to explore the expansion of the Fedwire Funds Service and National Settlement Service hours, to all-day and year-round, facilitating liquidity management in private-sector real-time gross settlement services for faster payments.

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