Fed Wants Paychecks to Hit Bank Accounts in a Flash

livemint.com:

The Federal Reserve hopes a new, faster-payments system will let U.S. bank customers send and receive money almost instantly, but it could be years before the speedier network gains widespread traction. The Fed this week is expected to launch its long-awaited FedNow system, which is intended to allow bill payments, paychecks and other common consumer or business transfers to be available quickly and around the clock, officials said.

That is a change from the existing, slower system that is closed on weekends and can at times take several days before consumers can access their funds. Last year those older rails handled 30 billion payments, valued at close to $73 trillion. The Fed’s system will compete with a real-time payments network built and launched by big banks in 2017, which processes a much smaller volume of payments.

While FedNow would theoretically give consumers access to their money immediately, only 57 out of thousands of banks and financial institutions are participating from the start, the Fed said in June. Officials have said it could take a couple of years before the system gains more-widespread adoption and its capabilities are more fleshed out. “It’s not going to be a big bang," said Craig Ramsey, head of real-time payments at ACI Worldwide, a payments-software company.

For millions of Americans, getting a payment immediately compared with in a day or two is crucial. An entire section of the financial-services industry fills the time gaps in today’s payment system, including payday lenders and check-cashing stores. They effectively offer bridge loans at high interest rates that prevent even more expensive utility shutoffs and overdraft fees.