The Federal Reserve launched a new instant-payment system called FedNow Thursday, allowing banks, such as J.P. Morgan Chase, U.S. Bank, Wells Fargo and BNY Mellon to use the service to transfer money for customers faster.
Several credit unions also are included among the financial institutions supporting the new payment system. FedNow is expected to allow consumers with accounts at participating bank and credit unions to use the banks’ mobile apps to send instant payments securely, the Federal Reserve said.
While some see it as possible competition for Paypal and other electronic payment systems, the Federal Reserve said it’s not designed to replace cash or any existing payment form.
"The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient," said Federal Reserve Chair Jerome Powell in a statement. "Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid."
As this news was announced, the National Association of Convenience Stores was urging its members to contact their representatives in Congress to support the Credit Card Competition Act, which many banks reportedly oppose.
The act aims to reduce excessive swipe fees by requiring large credit-card issuers to allow at least two credit card payment networks to provide choice in the market. The idea is to stimulate more competition and encourage Visa and Mastercard to lower the swipe fees they charge on transactions made with their credit cards.
In May, the Canadian government finalized agreements with Visa and Mastercard to lower the swipe fees merchants will pay by about 27% starting this fall.
An amendment to the National Defense Authorization Act for Fiscal Year 2024 that Congress is scheduled to consider next week includes an amendment authorizing a report on the impact of credit-card swipe fees at military commissaries. Sen. Roger Marshall (R-Kansas) is the amendment’s sponsor and seeks a report from the Secretary of Defense within six months “on the imposition of user fees” with use of credit or debit cards at commissary stores and morale, welfare and recreation facilities.
While swipe fees are often passed on to consumers and contribute to higher prices, two payments suppliers in the convenience-store space have merged and plan to provide a way for consumers without bank accounts to pay for transactions with their phones or refillable cards.
New York fintech company OLB Group acquired a majority stake in Cuentas SDI LLC, based in Miami Beach, June 15 to expand its digital financial services to more U.S. convenience stores. It is targeting 1,000 merchant customers in the next nine to 12 months for its new offerings, OLB Group Chief Executive Officer Ronny Yakov said Wednesday.
Credit and debit card swipe fees increased $22 billion in 2022 to a record $160.7 billion, according to the Merchants Payment Coalition, which said the fees are most merchants’ highest operating cost after labor.
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