Soon, You'll Be Able to Deposit or Wire Money Faster Than Ever. Here's How

The days of waiting three business days for your paycheck may be coming to a swift end. The Federal Reserve has plans to roll out a fast-banking service, an upgrade to the current payment system. It's called FedNow, and it's pretty cool.

In a nutshell, FedNow could lead to the following:

• Instant paychecks
• Instant peer-to-peer bank transfers
• 24/7 payments year-round, including weekends and holidays

There's little downside, though the government may have to fight through technical challenges to get FedNow up and running. Banking customers don't have to do anything to benefit from the upgrade, and some financial apps already offer these features.

Small bank and credit union customers may benefit the most. Here's how.

Transfers may speed up and cheapen

Peer-to-peer app users are familiar with instant payments. With Venmo, sending $10 to a friend is only two clicks away, but banking isn't always that easy. Some banks require two to three business days to process deposits, and most banks don't operate on holidays or weekends.

FedNow aims to change that. Financial institutions that opt into the service can take advantage of instant payments. That means you get payments immediately, 24/7, 365 days a year.

For example, a DoorDash driver might receive a bank payment instantly upon completing a delivery. Nonprofit organizations could immediately receive donations in a crisis or during a holiday, and businesses could send time-sensitive payments to suppliers during weekends.

Banking customers may also benefit from cheaper fees. According to the Federal Reserve, the expected per-transfer fee of FedNow would be $0.045, about five times cheaper than Venmo, which charges at least $0.25 per instant deposit.

FedNow may cheapen the cost of transfers, which banks typically absorb into their existing fee structure. Banks who opt into FedNow could pass on those savings to customers.

Customers don't have to do anything

The service will only be directly available to financial institutions. If your bank opts into the program, you will automatically benefit from faster transfers. Individuals don't need to take a course or contact their financial institution to make use of FedNow perks.

It's worth noting that FedNow may take time to ramp up. Users will be limited to sending money to institutions that opt into FedNow. The more institutions that participate, the more useful the service will be. The program may take months or even years to get rolling.

Payment apps offer instant deposits

Despite all these benefits and upsides, challenges exist. For one thing, the system is mostly untested. It's set to be released in June, but only among a small number of initial adopters. There may be technical challenges in setting up the digital payment rails. Banks will need to opt in to use the program.

In the meantime, we consumers can make do with popular payment apps offering cheap instant transfers and settlements. Venmo, Cash App, and PayPal are some of the biggest free peer-to-peer platforms out there.

Though the usefulness of the government-run service remains unproven, there appear to be few downsides. Most individuals stand to benefit from their bank opting in to FedNow. The program is being advertised as a fast payment method, but the Federal Reserve may add more features to the core service down the road, which is good news for banking customers.