Fednow Law

The Federal Reserve Board on August 5, 2019 that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow℠ Service, to support faster payments in the United States. This is welcome news for banks that are having a hard time competing with the theoretical allure of cryptocurrencies and other instant secure payment methods.

FedNow could resolve domestic payments speed issues, but would not unlock international payments or money transmission, all of which are still plagued by massive delays of 1 or more business days, especially in countries outside of North America and the EU.

From a legal perspective, the challenge will be to allocate risk for instant – and perhaps irreversible – payments. Today there is already fraud on the ACH rails, which have slower settlement times. Instant payments would need a new set of rules governing chargebacks, fraud and other losses.

We are following FedNow closely and will provide updates as to the new rules as and when they are published.