What is FedNow and its Role in the U.S. Payments System?

Consumer Finance Monitor

Our special guest is Professor Dan Awrey of Cornell Law School. In July 2023, the Federal Reserve launched FedNow, its instant payments system. After reviewing what FedNow is (and is not), we discuss FedNow’s design features and pricing schedule, the obstacles that currently exist for usage of FedNow by community banks, and what changes can be made to increase FedNow usage by community banks. We next look at the history of FedNow’s creation and how consumer groups have responded to FedNow’s launch, including FedNow’s impact on concerns about liability for peer to peer on-line payments in which the consumer who authorized the payment subsequently claims it was made to a scammer. Prof. Awrey then shares his expectations regarding the success of FedNow. We conclude with a discussion of the need for federal legislation to modernize the U.S. payments system and how a central bank digital currency would impact the role of FedNow.

Alan Kaplinsky, Senior Counsel in Ballard Spahr’s Consumer Financial Services Group, hosts the conversation joined by Ron Vaske, a partner in the Group.