[HoyaSaxa]

TLDR: Nearly all payments will irrefutably settle within a handful of seconds

Strictly speaking the primary means in which money moves in the United States from a volume perspective is ACH today. That system is a T+1 day from a default perspective, but it has offered the option to same-day settle during a handful of batches throughout a business day. However, ACH is not irrefutable and so it is common to have holds associated with this movement of money.

FedNow is truly 24/7/365 and push only.

All payment flows are subject to an end-to-end payment timeout clock of 20 seconds, starting from the creation timestamp to the point at which the recipient FI (almost always really a Service Provider on their behalf) sends a formal response that they intend to accept or reject the message.

An accepted payment must then be posted to the receiving account "as soon as practicable, but no longer than a few seconds” unless there are compliance/fraud concerns.

In practice, it should rarely take 23 seconds and will likely take 1-5 seconds from an end-to-end perspective depending on the processing speed of the originator, receiver and FedNow Service itself.

[88913527]

Couldn't having payments settle so quickly result in increased risk of overall system instability? I don't have a specific example, but I'm thinking of things like bank run panics. I'm sure this sort of thing would have been considered, however.

[HoyaSaxa]

Yes, it absolutely does increase the overall system instability. However, that is at great benefit to the consumer. There are some safeguards in place in the actual FedNow Service, but it is primarily up to the Service Providers to give the financial institutions tools to manage risk. This includes features like liquidity management, circuit breakers, fraud/compliance monitoring, limits, etc.

[Narkov]

You must remember, the US is very late to the "instant" payment party. This isn't a groundbreaking development.

[supertrope]

Faster settlement can also have stabilizing effects. With less money in transit there's less counter-party risk. Annoying rules like having to wait 10 bank days to spend money from a larger check you deposited can go away. The whole point of a checking account is liquidity.

[jowea]

Good question. Did that happen in any other country with faster payments? And SVB collapsed fast before this.