Instantly sending money to someone for a product or service requires stepping outside of your checking. Meaning you can't send a payment directly from your checking to some person/entity. There are options for doing this, such as filling out an online form with your bank to set up transfers to another bank account. But transfers are not payments.
There are also services such as bill pay, debit cards, which will deduct from a checking account, person-to-person (P2P) payment services, and ACH. ACH is very popular since it allows push (send a payment) and pull (someone debits your checking account). But ACH is not instant. In fact, it can take several days.
Same-Day ACH was introduced in 2016, but same-day is not instant. Europe and other countries are far ahead of the U.S. when it comes to instant payments initiated from a checking account. In 2008, the U.K. introduced instant payments. In 2017, the Single Euro Payments Area (SEPA) was introduced in 36 countries, allowing instant bank payments.
There is always FedWire, commonly referred to as a "wire." It can usually transfer money on the same day but for a hefty fee. But again, it isn't instant.
The Federal Reserve is looking to change that with FedNow Payments. This system will provide instant payments for a small fee. It is expected to be introduced in July 2023.
FedNow will have a cap of $500,000 and likely obsolete a lot of wire transfer cases. Once July rolls around, FedNow won't instantly be available at every bank. It will be implemented on a bank-by-bank basis. Banks must opt-in, but even once they do, more work is needed. FedNow doesn't provide an interface, so banks will need to overlay one. Hopefully, fintechs will provide these services, reducing the burden on financial institutions and helping speed up the rollout.
There are some concerns about fraud since FedNow doesn't offer a way to retract payments made in error or fraud. Wires do offer such services. However, P2P services lack fraud protections as well. In some cases, banks will step in and absorb customer losses. Given that FedWire provides fraud protections, it would not be surprising to see FedNow eventually do the same. If such protections were implemented, it could grab a large market share from P2P services.
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