Emerging markets have embraced instant payments in part because of demography (consumers are younger and more open to change), in part because of a crackdown on cash (policymakers are keen to shrink the size of grey markets, and increase tax takes) and in part because, unlike in America, new payment systems did not have to push aside existing ones, and those who benefited from them. FedNow is unlikely to transform payments immediately. The scheme will only support “push" transfers—ones that consumers initiate themselves.
By contrast, FedNow’s counterparts in Europe and India also have “pull" capabilities that businesses may use when given permission (which enable, say, regular payments for electricity). Fed officials claim to have no plans to extend the system for such uses, but bankers suspect it is the next step. Mass adoption will face one more hurdle: the American consumer, over whom paper-based payments retain a particular hold.
According to aci Worldwide, a payments firm, around a fifth of all cash transfers in the country happen via cheque. Still, it will be nice for them to have the option, just like the rest of the world. Editor’s note: This piece has been updated to incorporate news of FedNow’s launch.
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