What if you could pay bills without having to wait for your paycheck to clear?
The Federal Reserve Board is developing a system that will process payments within seconds, rather than making individuals and businesses wait hours or days for funds to settle.
The system, called FedNow, could have a big impact on people in a pinch who are forced to use check-cashing services, take out high-interest loans or incur overdraft fees when their bills are due before their paychecks hit their bank accounts.
The Fed says the immediate payment system announced Monday will give people better access to their own money.
"Beyond speed and convenience, faster payments can yield real economic benefits for individuals and businesses by allowing them to make time-sensitive payments whenever needed and providing them with more flexibility to manage their money," an FAQ about the system says.
FedNow will offer all Americans better banking, Federal Reserve Board Gov. Lael Brainard said.
"Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community," she said in a statement.
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FedNow is expected to be available to banks in 2023 or 2024. Individuals will not need to sign up or use a website or app to reap the benefits; rather, the system will be part of the back-end infrastructure of banking.
Big banks lobbied against the system after investing about $1 billion in their own instant-payments system, The Wall Street Journal reported. They argued in favor of private sector alternatives to a public system.
Sen. Elizabeth Warren, D-Mass., praised plans for FedNow.
"I'm glad the Fed has finally taken action to ensure that people living paycheck-to-paycheck don't have to wait up to five days for a check to clear," she told the Journal.
