5 Min Ago: FEDNOW Just Did Something Big! CBDC | US Dollar | Credit Cards [What you NEED to know]

instant paychecks and no more waiting let's talk about fed now well right now in your bank account the Federal Reserve announcing it has gone live with its new fed now instant payment system that should allow households and businesses to send payments and receive money immediately without those troubling three-day holds on checks and waiting for payments to clear in the sender's account and waiting for the bank to open on Monday or after a holiday the FED now system is an instant payment system it's available 24 7. 365 days a year to begin with 35 Banks and 16 service providers have already signed up those Banks include things like JPMorgan and Wells Fargo's well smaller credit unions and other Banks unclear if the banks are going to charge for this instant payment they are charged but they may or may not pass that along to Consumers uh Fed chair Jay Powell saying in a press release over time as more Banks choose to use this tool the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck or a company to instantly access funds when an invoice in is paid sure they talk about all the advantages but the FED Now launch also comes with some pretty big challenges for banks and other payment players Moody's did a whole report about this loss of interchange revenues issuers rely heavily on fees from credit card payments and to a lesser extent debit card payments but if consumers and businesses start using fed now instead of cards those revenues could very well dry up in 2022 Merchants paid an estimated 85.6 billion dollars in credit card processing fees and more than 80 percent of this went to issuers as interchange revenues but with the introduction of the FED now system there is a possibility that consumers and businesses might shift away from using credit cards and instead offer instant payments through this new real-time payment system now since fed now offers the convenience of instantaneous transactions without the need for intermediaries like credit card networks some issuers actually could prefer this method over credit card Parts this could affect Banks Visa Mastercard American Express you name it especially for everyday transactions now if a big enough number of consumers and businesses switch to using the FED now service platform it could potentially lead to a decline in credit card usage and as a result the volume of credit card transactions would also decrease leading to a reduction in interchange fees collected by credit card issuers in other words the revenue generated from credit card payments would dry up for credit card companies then there are the costs of beefing up the tech right so fed now enables 24 7 real-time money movement but this adds security risks to Fed now Partners they won't tell you this but the FED could also monitor your transactions in real time and also disrupt them if needed you know what I mean they may need to increase investments in technology and staff to monitor around-the-clock transactions to protect against cyber attacks now one of the primary challenges that financial institutions face is the constant monitoring required for real-time transactions it's not like traditional systems were transactions may have been basically batch processed or settled at interval periods the instantaneous nature of the FED now transactions means always on never off continuous monitoring now they basically need this real-time monitoring for identifying and responding to any potential security threats promptly but that puts smaller banks at a disadvantage since they don't exactly have whole cyber security departments dedicated to this type of thing you know what I mean plus there's always the always looming threat of Bank runs faster money movement could also increase the risk of Bank runs Moody's noted that recent bank failures were exacerbated by the speed of withdrawals which could happen even faster with fed now Bank runs happen when a large number of customers simultaneously withdraw their deposits from a bank because they feel that the bank could become insolvent or basically fail to meet its obligations and so what this means is that Banks reserves definitely won't be able to keep up so you'll end up with a full-blown collapse like what we saw with Silicon Valley bank and now now the speed of transactions with fed now introduces an element of immediacy to money movement since customers gain that immediate access to their funds to real-time payments the possibility of withdrawing huge amounts of money from their accounts becomes even easier and quicker this newfound convenience could potentially stroke people's fears and panic that could trigger a bank run now just as an example just imagine a scenario where rumors or negative news about A bank's Financial stability spread Ultra fast on social media or news Platforms in a traditional system customers could basically take some time to consider their options and maybe coordinate their actions but with fed now customers could quickly and simultaneously withdraw their funds so that could mean a rapid drain on the bank's resources the risk of faster Bank runs could have pretty big consequences for the stability of financial institutions especially smaller banks with fewer resources to weather these kinds of threats we're talking sudden and sharp withdrawals of deposits that could seriously drain A bank's liquidity making it basically you know very difficult for them to meet their customer demands and maintain normal operations the potential end result loss of confidence among other customers and possibly triggering a domino effect on the broader Financial system maybe fed now should have a requirement that any banks using the system need to dramatically increase their Capital reserves to lower the chances of Bank runs making Banks insolvent but what do you guys think now I'm pretty sure we've all wondered why businesses can charge my card before I get to my car right but yet it takes weeks to get a refund don't forget to subscribe to the channel you guys and by subscribing to the channel you guys will stay up to date with all the latest updates and financial topics news and strategies for achieving Financial Freedom so make sure you guys are subscribed to the channel you guys support means the world to me and it also helps the channel to continue to create informative content for you guys so make sure you hit the like button hit the Subscribe button and join our Financial Freedom fam now another one that I read about fednow insta in payments or instant fraud fed now's faster payment capabilities there's this newfound convenience but it also makes smaller institutions so that fraud could be more susceptible and apparently fraudsters tend to Target smaller and medium-sized entities because they lack the extensive resources of the large banks these criminals see a huge opportunity and they exploit it but wait there is more so once fraudsters identify a successful method they apply it not only to other institutions of the same size but also to Big Banks it's kind of like a domino effect making the fight against fraud even more challenging cases of authorized push payments or app fraud and scams have surged by 12 and a half percent between 2021 and 2022 app fraud alone has nearly tripled accounting for a staggering 18.6 percent of all fraud worldwide for now the US has managed to avoid the full impact of app scams since it's only 1.2 percent of real-time payment transactions but if the the FED doesn't do anything about this the U.S could eventually face a similar crisis level of app scams seen in other markets now what's especially worrying is that despite the growing levels of fraud fed Now does not currently have specific plans to incorporate fraud detection technology so basically financial institutions are left to fend for themselves in detecting and combating real-time fraud most likely we're going to be seeing solutions that are reactive rather than being proactive we'll just have to see how this turns out but it's kind of scary how a big potential problem that this could actually be by the way if you guys own a home make sure your home is protected get your free home warranty quote there's a link in the description down below this video and you know what guys if you lose your money due to bank fraud they're not legally obliged to give you your money back I remember that one story of a JPMorgan Chase client losing thirty thousand dollars because the bank gave somebody else with a fake ID access to the account how did JP Morgan Chase respond basically tough luck now just imagine this happening on a massive scale with fed now definitely concerning now if you fall victim to fraud or unauthorized transactions getting a reversal or reimbursement might not be as straightforward as it is with traditional systems you see once the money is sent through fed now it's kind of like a wire transfer once it's done the Consumer Financial Protection Bureau is looking into this matter but we're not sure yet how this is going to play out and if you know anything about wire transfers good luck on getting it back if it was sent in the wrong direction now fed now it's not exactly a cbdc but it still contains a lot of dangers now you may have noticed fed now has been a trending topic on Twitter a lot of curiosity a lot of skepticism and well-founded concerns about privacy and government surveillance and so this is where we need to be clear fed now it's not essential Bank digital currency or cbdc by itself nonetheless since its approval by the Federal Reserve in 2019 I have consistently warned about the potential dangers that it carries pretty much like with a cbdc and the unique risks with the unprecedented intrusion of the Federal Reserve into everyday economy now in essence fed now is a government-backed real-time payment system designed to compete with private sector Alternatives and it will directly challenge existing bank-based payment systems like RTP and Zell and indirectly compete with popular fintech apps like chime and Dave along with privately issued cryptocurrencies but some experts in the field they're saying that fed now appears to be a solution searching for a problem potentially leading to the creation of new issues now the major concerns shared with cbdc's is that fed now would allow the government specifically the Federal Reserve access to sensitive details of consumer transactions posing significant privacy risks and so this means the government could obtain your personal data without a warrant and potentially share it with law enforcement agencies plus how susceptible could this be the hacking and you know the government's track record with data breaches it's not really any better than the private sectors not to mention just think about the ethical questions including the revelation of intimate spending habits travel history and more which by the way the government should not have the right to know but what do you think guys and like I mentioned the competition the rollout of fed now raises concerns about its potential to crowd out private sector competition from fintech and from cryptocurrency providers because let's face it guys it's pretty hard to compete with government backing combined with the regulatory wielding power of the Federal Reserve this could stifle Innovation and limit consumer choices in the payment space in fact fed now could very well be putting banks in the front of yet more risks because all these faster payments I mean sure you know there's flexibility there's also danger here though experts even went as far as to suggest that the payment service may end up being like credit negative for banks particularly the smaller tanks fed now is also set to revolutionize bank-to-bank payments allowing money transfers in near real time at any time of the day as per the Federal Reserve now they're saying that the implementation of the system could benefit smaller Banks and Credit Unions enabling them to catch up with larger competitors and non-banking institutions in terms of payment technology enhancing their competitiveness especially among younger consumers but what they don't really talk about is how fed now's introduction could also have a negative impact for payment firms and banks that heavily rely on debit and credit card interchange fees potentially reducing your revenues now the major concern for banks is the risk of losing out on the float like the funds that they effectively earn before you know formally registering a deposit or withdrawal now with instant payments consumers can quickly move their funds so there could be this reduced deposit balances plus Banks might need to invest heavily in upgrading their infrastructure to support the technology which is a whole other mess of cost if you guys think about it and fed now means money has to be available for people 24 7. and so that could pose liquidity management challenges for smaller Banks especially during periods outside of regular work hours I mean just ask svb Silicon Valley Bank these recent bank failures have definitely they've highlighted the major role of how fast deposits can move in and how quickly Bank runs can happen though they have launched already fednow's widespread adoption and significant changes to payment methods they they could take a decade or more and that is because in economies like ours with well-established payment infrastructure services like this take a while to see bigger adoption I mean really instant payments take off quicker in emerging markets in the United States fed now will not only compete with traditional payment Technologies like credit cards and automated Clearinghouse transfers but it's also going to be directly challenging the real-time payment Network which is owned by Major Banks plus the banks face another risk with the rise of apple and savings account which offers high yields and enjoys strong consumer trust overall fed now is promising to transform payment systems but we really haven't seen its full impact on the banking industry and payment landscape quite yet right now it's more about the cautious optimism in the industry kind of like a wait and see for further developments something that we're gonna have to keep an eye on in our next updates right guys