Paypal vs venmo revenue11/18/2023 Rather, it is meant to work alongside the current systems built by the private sector.īut FedNow could be a game changer because thousands of banks already using the Fed’s current, slower payments system may see FedNow as a safe and faster option that has government backing. The Fed has made clear that FedNow is not intended to kill or replace other money transfer options like Venmo, Cash App, PayPal or Zelle. Does FedNow Replace Money Apps like Venmo and Cash App? Others are considering whether to offer a CBDC as fiat money for the public, with the accounts held at a central or commercial bank. Some countries are looking at whether a central bank digital currency could be a safer, faster way of transferring funds between banks. Issuing a CBDC is “something we would certainly need congressional approval for,” Fed Chair Jerome Powell told the House Financial Services Committee in March.Ĭountries including the Bahamas, China, India and Nigeria have launched CBDCs, and more than 100 other nations are exploring the idea, according to the international policy think tank the Atlantic Council. The Fed has clarified that it has made no decision on issuing a CBDC, and that it would “only proceed with the issuance of a CBDC with an authorizing law.” Part of the confusion stems from separate discussions on whether the Fed should create what’s called a central bank digital currency (CBDC). The promise of FedNow is that it will allow financial institutions to make those transfers happen between bank accounts, and in the blink of an eye.Īnd while there have been claims on YouTube and TikTok and other social media that FedNow will replace the dollar with a new digital currency, these claims are false.Īs the Fed puts it, “The FedNow Service is neither a form of currency nor a step toward eliminating any form of payment, including cash.” Will FedNow Create a Digital Currency?Ĭritics have speculated that FedNow will create a digital currency, but the Fed has tried to dispel this false assumption by flatly saying, “FedNow is not related to a digital currency.” Think of it as a platform that will transfer your dollar online, the same way popular money apps transfer funds. No, the FedNow system won’t replace the dollar, or digital currency for that matter. You can send funds on the due date rather than having to plan several days out for an online payment to clear, or up to a week for a check to be processed.Īlso, business owners can send and receive invoice payments in real time online. With FedNow, you can make payments-say, on your mortgage-ideally within seconds. But to receive money in your bank account-whether from a check, direct deposit or payments app-you may have to wait a few business days, or bide your time over holidays or weekends. The Fed already has a payments portal but it doesn’t operate in real time, unlike Venmo, Cash App and other money transfer apps that allow users to instantly send money between app accounts. government-created and -backed portal allowing banks to send and receive funds almost instantly. Its potential impact on the global banking industry-with thousands of financial institutions able to access the system-has generated not only praise but also concerns and confusion about what FedNow will actually do. It’s the first government-created platform to help your bank transfer money in real time, similar to what the private sector has created through payment apps like Venmo and Cash App that send funds almost instantly but outside of bank accounts.įedNow, which is in a soft launch as of Thursday, July 20, has been years in the making. The Federal Reserve has launched its long-anticipated faster payments system, called FedNow.
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