My take on FedNow as a Computer Information Systems and Economics Student

Over the past year, i’ve been studying third party Real Time Payment Rail technologies, Cryptocurrencies, open Blockchain settlement systems, and International correspondent banking architectures.

With the announcement of the Federal Reserve’s new instant payment service, it is vital to consider the potential effects on the economy.

Instant payments can revolutionize how we conduct transactions, making them faster, more efficient, and more secure. This can have far-reaching implications for businesses and consumers alike, as it could reduce the need for traditional banking services and enable more seamless global trade.

The FedNow Service, which will launch this year, is critical in developing instant payments in the United States. Providing a real-time settlement system will enable businesses and consumers to make instant payments 24/7, 365 days a year. This will help streamline the payment system and reduce costs for consumers and businesses.

However, instant payments can pose many risks, which may create an opinion chasm:

. 1. The speed of transactions can make it easier for fraudulent activities to occur, as there may be less time for checks and balances to be put in place.

. 2. Instant payments may be irreversible, making it difficult to recover funds if a transaction is made in error or under fraudulent circumstances.

. 3. The lack of visibility and transparency in some instant payment systems can make it challenging for regulators to monitor and mitigate risks.

How AI can help…

Artificial intelligence (AI) has the potential to help mitigate these risks by providing real-time monitoring and analysis of transactions.

AI-powered fraud detection systems can analyze vast amounts of data in real-time, detect patterns, and identify potentially fraudulent transactions quickly. AI algorithms also have the ability to learn from past fraudulent activities and adapt to new and emerging threats, making them highly effective in preventing fraud in instant payments. This can enable more effective oversight of the payments system, helping to prevent fraudulent activities and promote greater financial stability. Similarly, AI-powered payment reconciliation systems can help to identify errors and anomalies in payment data, reducing the likelihood of incorrect transactions.

Furthermore, giving regulators greater visibility into payment flows and trends will improve overall transparency in the instant payments ecosystem.

As an infinitely curious STEM and Business student, I am excited to see how the FedNow service, instant payments, and artificial intelligence can work together.