The Federal Reserve is set to launch “FedNow,” an instant payment service, in July. In a March 15 press release, the central bank said it would begin to formally certify participants in the first week of April for the service’s launch and improve on it based on feedback from its pilot program.

After watching the U.S. financial industry change over the past few turbulent years, the Fed introduced the FedNow service to keep up with the sector’s expanding demands and evolving circumstances.

Through real-time payments on FedNow, transactions between banks and other financial institutions can be processed immediately, which cuts down the time for funds to clear. 

It will allow users to pay a bill and receive an immediate confirmation without risk of overdrawing their account or paying an overdraft fee since there will be multiple verification systems ahead of the transaction.

Compared to typical payment systems, which only handle transactions during business hours, FedNow is a 24/7 service.

The Fed currently has more than 120 banks and payment providers, such as the U.S. Treasury, U.S. Bancorp. and Exchange Bank, as part of its pilot program.

Payments industry consultant Peter Tapling said that the treasury’s use of the service may create a need for more financial institutions to join FedNow when it is launched, according to NerdWallet.

FedNow’s advantage of delivering quicker and more effective payments can aid both firms and individuals in managing their cash flow and enhancing their financial well-being. The provision of real-time transaction monitoring and reporting also aids in lowering the risk of fraud and other financial crimes.

“We couldn’t be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution,” Ken Montgomery, the Boston Fed’s first vice president and a FedNow program executive, said in a press release.

The service also makes use of modern security techniques and technology to guarantee that transactions are handled quickly and safely, marking a critical milestone in the Fed’s attempts to update its infrastructure.

FedNow’s compatibility with other real-time payment systems, both domestic and abroad, is another major benefit. Regardless of their location or the payment mechanism they are utilizing, financial institutions can use FedNow to transfer money among each other.

Additionally, the Fed is trying to make FedNow accessible to all financial organizations, including small community banks and credit unions. This would foster financial industry innovation and competition, which ultimately helps consumers and businesses.“The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy,” Tom Barkin, the Richmond Fed president and a FedNow executive sponsor, said in a press release.