Fact or Myth? The Truth About FedNow & What Your CU Needs to Know
In the coming weeks, the federal government will be launching FedNow--a way for users to send and receive funds in seconds, as opposed to hours or days as is commonplace with many credit unions, banks, and other financial institutions.
Because this is such a major shift for many people, there are a lot of myths and rumors going around about the service. Separating fact from fiction is one of the keys to making the most informed decisions possible regarding where, when, and how you choose to handle your essential financial matters.
Does FedNow Give the Government Power to Seize Bank Accounts?
One of the most prominent rumors about FedNow is that it will give federal agencies the authority (if not the technology) needed to seize bank accounts at will. Many are worried that they may do so as retribution for their publicly stated political beliefs.
Thankfully, this is nothing more than a rumor; it is completely false. It is simply replacing the Federal Reserve's current system to process checks and electronic payments, as per the Associated Press.
Is FedNow Replacing Cash?
This is another prevailing thought that many are discussing in recent months, but it is once again false. While it's true that credit union members may see the FedNow payment system as a more convenient way to transfer money from one account to the next or to pay bills with financial institutions that support it, the system itself is not designed to replace cash transactions.
Is FedNow Digital Currency?
There's so much talk about cryptocurrency in the news recently that it's easy to see where this myth originated. Thankfully, this is another myth that the Federal Reserve officials themselves have put to rest. They have plainly stated that the system "is not related to a digital currency."
Is FedNow Going to Replace All Digital Payment Systems?
Over the last decade in particular, many people who desire to handle banking transactions like money transfers on-the-go have turned to digital payment options like Venmo, PayPal, and Zelle to meet those needs. With the increased discussion pertaining to FedNow, a lot of those same people are now worried that there will be fewer options moving forward.
This, too, is nothing more than a myth. The Federal Reserve has made it clear that if you want to continue to use something like Venmo or Cash App, you are free to do so. FedNow isn't supposed to replace anything--rather, it will work in conjunction with other services you may be using through financial institutions like credit unions that support it. Everything is also protected by FedNow safe cybersecurity best practices.
FLEX Can Help Make Your FedNow Integration Smoother
At FLEX, we've recently started the FedNow integration process with our own systems and are eager to bring these and other benefits to as many credit unions and their members as possible. Although the initial launch of FedNow is taking place in July 2023, functionality will continue to roll out in phases moving forward. If you have any additional questions regarding what this means in a general sense, or if you're curious about our own implementation and integration timeline, we've recently authored a piece about the subject that you can click the button below to read now.