Instantly transferring money amongst friends is easy thanks to the abundance of mobile payment services like Venmo or Zelle. Now, the Federal Reserve is getting in on the action.
The Fed announced that it is developing a real-time payment service called FedNow Service, which is an around-the-clock payment and settlement service that will support faster payments throughout the United States. FedNow aims to provide a safe and efficient way to make near-instantaneous fund transfers. Launching in 2023 or 2024, this service will operate 24/7. The announcement is exciting news for companies and consumers, who have been requesting such a service from the central banking system of the United States for years.
FedNow will modernize the nation’s payment system and will have huge benefits for individuals and businesses. It will provide them with more flexibility to make time-sensitive payments, without waiting days for deposits to clear. Currently, it can take consumers and businesses up to 72 hours to send and receive money. This can cause major issues for those living paycheck to paycheck, who may receive a check at the end of the month, but have to wait a few days for the deposit to clear in order to use the money to pay bills. FedNow aims to eliminate this issue.
Another goal of FedNow is to support an open banking nationwide infrastructure on which the financial services industry can develop innovative, faster payment services for the benefit of all Americans. Currently, some of the largest American banks own The Clearing House, which operates an electronic check clearing and settlement system and a wholesale funds transfer system. It is also the only private sector ACH and wire operator in the United States, settling and clearing nearly two trillion dollars in payments a day, which represents half of all commercial ACH and wire volume. While the Clearing House offers a real-time payment system for financial institutions, many small banks and businesses are not members of The Clearing House, which means they are excluded from its instant payment system. FedNow will be inclusive of all financial institutions in the United States.
“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.
In order for FedNow to enable secure instant payments, the system will need to rely heavily on the mainframe. Mainframes are extremely prevalent in both financial institutions and government agencies. Their ability to house multiple terabytes of data and securely and safely store information makes them perfect for playing the central role in ensuring that FedNow is a success. Ninety-two of the top 100 banks use the mainframe to provide banking services to their customers. It’s estimated that three trillion dollars in daily commerce flows through mainframes. Companies that rely on the mainframe will need a reliable and efficient mainframe integration tool to harness its power. Mainframe systems are complicated from both a programming language perspective, as well as the data itself. The mainframe integration solution must be capable of seamlessly handling these challenges in order to make FedNow a successful instant payment system that will benefit all.
If you’re looking for a mainframe integration solution to ensure the success of your company, let us introduce you to Ivory Suite.
-Amanda Bierfeld Williams, Marketing Coordinator at GT Software