Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, during a break at the Jackson Hole economic symposium in Moran, Wyoming, US, on Friday, Aug. 26, 2022. Powell signaled the US central bank is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation, and he pushed back against any idea that the Fed would soon reverse course. Photographer: David Paul Morris/Bloomberg via Getty Images
Photo: David Paul Morris/Bloomberg via Getty Images

FedNow is coming. Is this real-time payments’ moment?

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Tuesday: FedNow gets a timeline, restaurants discover the blockchain, and “buy now, pay later” finds new markets.

Off the chain

Want a dinner reservation? Buy an NFT. That’s the answer for hard-to-get tables like one at New York City’s Dame, according to the Infatuation. NFT-based membership costs $1,000. At San Francisco’s Sho, a restaurant atop Salesforce Park, NFT memberships start at $7,500 and offer “priority” reservations. Since NFTs can be readily sold and transferred, it seems like this is a recipe for hyper-financialized table scalping: Just rent the NFT for the night and get the table you want. It seems like it’s only a matter of time before restaurants discover the holes in this business model.

— Owen Thomas (email | twitter)

Next summer’s payments blockbuster

Get ready for a 2023 summer blockbuster for payments tech: The FedNow system will launch between May and July next year, the Federal Reserve announced Monday. The new system promises to modernize the way thousands of institutions move money and allow for greater use of instant payments, a category where the U.S. lags behind much of the world.

The shift to real-time payments is "inevitable," Fed vice chair Lael Brainard said Monday. Brainard's speech to a group of FedNow early adopters gave the most specific timeline yet from the Federal Reserve on FedNow’s launch.

  • "The FedNow Service will transform the way everyday payments are made throughout the economy, bringing substantial gains to households and businesses through the ability to send instant payments at any time on any day," Brainard said.
  • The Fed has already started a pilot program for the service. But how quickly consumers see the value of rapid payments isn’t totally in the central bank’s control.
  • "Ultimately the number of American businesses and households that are able to access instant payments will depend on financial services providers making the necessary investments to upgrade our payments infrastructure," Brainard said.

The system could mark the biggest upgrade to U.S. payments tech in decades. Payments company Modern Treasury noted it's the "first new payment rail in the United States since the introduction of the Automated Clearing House (ACH) in the early 1970s."

  • The ACH network handled more than 29 billion payments in 2021, valued at close to $73 trillion, according to its operator.
  • The FedNow system will allow paychecks, bill payments and other transfers of money to happen instantly and at all times, whereas existing wire services shut down on weekends.
  • While Cash App and Venmo facilitate peer-to-peer instant transfers, FedNow will move money between depository institutions. The Fed recently released new rules for companies, such as fintech and crypto providers, that wish to access its payment rails.

The U.S. is way behind on rapid payments. Less than 1% of payments in the country were settled in real time last year, according to a report from payments processor ACI Worldwide.

  • About 1.8 billion U.S. payment transactions were settled in real time last year, according to the report, compared to 49 billion for global leader India, helped by the country's United Payments Interface.
  • A group of big banks that includes Citigroup and JPMorgan Chase launched a real-time payments network in 2017 that is operated by The Clearing House. Called the RTP Network, the network processed about 41 million transactions worth $18 billion in the second quarter of 2022.
  • The big banks lobbied against the Fed launching a competitor to their service, but FedNow could serve smaller institutions hesitant to sign up for the RTP system. A big question is how and when the FedNow network will connect to RTP and other systems. An FAQ on FedNow said its goal is to reach across networks: "The Federal Reserve, however, cannot accomplish interoperability for instant payments alone."
  • There will also be a “last-mile” challenge in ensuring that consumers have access to the FedNow system, said James Angel, a finance professor at Georgetown University’s McDonough School of Business. ”In order to achieve the ability for all-to-all, real-time payments, there needs to be a common interface, like India's UPI, that everyone can use, or some other mechanism to ensure interoperability of the various systems already in place,” said Angel, adding that FedNow still represents a big step in the right direction

FedNow's launch could also influence the debate around a central bank digital currency. Fed Gov. Michelle Bowman said recently that FedNow could address many of the same issues as a digital dollar, and Neel Kashkari, the president of the Minneapolis Fed, has been a loud critic of CBDCs. Brainard avoided that topic in her remarks Monday, focusing instead on the ability of rapid payments to help families avoid costly fees for late bill payments or overdrawn accounts. "During the pandemic, we witnessed how essential rapid access to funds can be," Brainard said, "as many households started spending emergency relief payments on the day they were received."

— Ryan Deffenbaugh (email | twitter)

Interested in payments? Don’t miss Protocol’s Tomio Geron upcoming panel. On Sept. 8 at 10 a.m. PT/1 p.m. ET, tune in to hear from him and industry experts about the big changes in America’s payments infrastructure and the challenge of catching up with innovation overseas. Reserve a spot now.

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On the money

“Buy now, pay later” users are using the services to buy groceries. There were $45.9 billion in “buy now, pay later” transactions made online in 2021 in the U.S., up from $15.3 billion the year before — with food a small but important growth area for that spending.

Lawmakers have some questions about a “shoot now, pay later” fintech that helps people buy guns. A group of 18 Democrats in Congress want Credova Financial to detail how it ensures guns purchased with “buy now, pay later” financing are not being quickly resold to other buyers, among other concerns.

OpenSea's NFT trading volume has sunk. Trading volume on the leading NFT marketplace is down 99% in just under four months, Fortune reports.

Sam Bankman-Fried says FTX is not buying Huobi. He took to Twitter to shoot down rumors aired a couple of weeks ago that FTX would buy the rival crypto exchange.

Credit scores are still at an all-time high. The national average credit score is 716, unchanged from a high point reached a year ago, according to a new report from FICO.

A DeFi protocol lost $661,000 because of a programming blunder. OptiFi accidentally used the "solana program close" command while designing an upgrade, resulting in the permanent closure of the platform, the developer said (the platform promised to return customer funds through another method).


Limited partners are taking a closer look at crypto VC funds, which CoinFund’s David Pakman says are “an immature asset class where the risks are hard to fully quantify.” Hacks have some investors getting nervous: “So far it hasn’t been a serious issue, but definitely something to discuss further with managers going forward,”Accolade Partners’ Atul Rustgi told the Wall Street Journal.

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How cybercrime is going small time: People have been swindled since before man created monetary systems. These aren’t new crimes; just new ways to commit them. But as cybercrime increasingly goes small-time, those on the front lines will need new and more effective ways to fight it.

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