The US Federal Reserve has launched a long-awaited service that will aim to modernize the country’s payment system by eventually allowing Americans to send and receive funds in seconds, 24/7, the central bank announced Thursday.

The «FedNow» service, which has been in the works since 2019, will seek to eliminate the multi-day delay commonly required to settle cash transfers, bringing the US in line with countries like the UK, India, Brazil and the European Union, where similar services have existed for years.

FedNow is launching with 41 banks and 15 service providers certified to use the service, including community banks and large lenders such as JPMorgan Chase, Bank of New York Mellon and US Bancorp, but the Fed plans to add more banks and credit unions this year.

The Fed said in a statement Thursday that 35 banks and credit unions were currently using the service, as well as the Treasury Department’s Office of Fiscal Services.

The service will compete with private sector real-time payment systems, including The Clearing House’s RTP network, and was initially opposed by big banks saying it was redundant. But many have since agreed to participate on the grounds that FedNow will allow them to expand the services they can offer to customers.

“For us, FedNow is really a wonderful way to expand reach,” said Anu Somani, head of global accounts payable and integrated payments at US Bank.

Unlike peer-to-peer payment services like Venmo or PayPal, which act as intermediaries between banks, payments made through FedNow will settle directly into central bank accounts.

The Fed also operates a real-time payments system called FedWire, but it’s reserved for large-scale, mostly corporate payments, and is only operational during business hours. While the new FedNow system is for everyone, it is likely to benefit consumers and small businesses the most, analysts say.

“We want our clients to benefit from these capabilities and we want that to be a competitive advantage for us,” said Carl Slabicki, global co-head of payments for BNY Mellon Treasury Services.

Smaller banks, which often connect to FedWire through larger lenders, encouraged the Fed to develop FedNow, arguing that it would allow them access to real-time payments without having to pay larger competitors for the service.

“Having the Fed in the space makes our members more comfortable that their needs will be met, that they will be treated fairly for prices,” said Lance Noggle, senior vice president of operations and senior regulatory counsel at Independent Community Bankers of America. , a commercial group.

FedNow will not charge consumers, though it is unclear if or how participating banks will pass on the costs associated with the service.

Democratic Sen. Chris Van Hollen, who urged the Fed to develop a real-time payment system, said in a statement that the launch of FedNow is «good news for American consumers and our economy.»

“The launch of FedNow will help connect Americans to their money, when they need it, immediately, in real time, and save consumers billions of dollars a year,” he said.

Some market participants have raised concerns that FedNow could overburden a potential bank run by facilitating quick exits from financial institutions, a fear that was amplified after the Silicon Valley Bank failure earlier this year.

But Fed officials have downplayed those concernsarguing that banks have tools available to mitigate a wave of exits.

Initially, FedNow will have a maximum payment limit of $500,000, but banks can choose to lower that limit if necessary.

Reuters reporting by Hannah Lang in Washington; Edited by Michelle Price and Andrea Ricci