About five years ago, a friend told me about something called a Fed Coin, which was a digital payment system like Bitcoin but by the US Federal government. I laughed at him. The feds getting in on the digital payment game? No way. Ooops! Look like I got egg on my face. The Federal Reserve said it would launch its instant payment service FedNow in July.

This is more like a Paypal or Zelle, but the US government runs it. I explain more of how it turns below, but anything that has ever used Zelle before will realize how similar it is. Actually, according to the Fed, a mix of banks of all sizes, including the largest processors and the U.S. Treasury, are on board. The central bank is continuing to speak with financial institutions and service providers to test the program ahead of its implementation.

"With the FedNow Service, the Federal Reserve is creating a leading-edge payments system that is resilient, adaptive, and accessible," said Tom Barkin, president of the Federal Reserve Bank of Richmond and the FedNow Program's executive sponsor.

The instant payment network will settle payments in seconds, with the capability to support consumer-to-consumer, consumer-to-merchant, merchant-to-merchant, and bank-to-bank transactions.

"The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy."

Starting in the first week of April, the Fed will begin formally certifying banks to launch the service. Early adopters will have to conduct customer testing, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system. The Fed maintains making funds immediately available will help Americans living paycheck to paycheck or small businesses with cash flow constraints by avoiding late payment fees and freeing up working capital to finance growth. FedNow refers to the real-time payment and settlement service that will work not on bankers hours but actually 24 hours a day, 7 days a week, 365 days a week. It will integrate the functionality of clearing and settling the payments. It will authorize the financial institutions to share information required to make the deposit and withdrawal to the customer’s account. Moreover, it will allow them to inform the customers about the failed or successful payments. At present, the Federal Reserve Board facilitates payment and information services to over ten thousand financial institutions. However, after the implementation of FedNow, it will offer access through the FedLine networking both directly and through agents. Therefore, FedNow may launch in 2023 or 2024 and will continue to exist, exclusive of the RTP network initiated by The Clearing House in 2017. Thus, the services of FedNow will be released in phases, followed by additional features and service enhancements. The payment procedure will take place between the financial institutions in real-time, and the recipient will receive the money within seconds. With the help of FedNow Service, the financial institutions can fulfill the emerging needs of the customer and give cutthroat competition to the other institutions.

• The FedNow will only be responsible for domestic transactions and not for international payments and debit authorizations.