A MARTÍNEZ, HOST:
Sending money from one bank to another down the street can take longer than sending a package all the way across the country. So the Federal Reserve is trying to change that with FedNow, a new, faster way to send money. But as Emma Peaslee from NPR's Planet Money podcast reports, banks are taking their time adopting it.
EMMA PEASLEE, BYLINE: The way money moves in the U.S. is very slow. Aaron Klein used to work at the Treasury Department and now at the Brookings Institution, and he is a bit obsessed with banking transfers.
AARON KLEIN: The Federal Reserve has used a decades-old system called an automated clearing house, or ACH, which operates like a laundry machine on a batch. You put all the payments in at once, you press the button, you wait a while and all the payments get sorted and come out together.
PEASLEE: Which can cause problems. Like, say your company pays you at the end of the month, but the money doesn't hit your account until a day or two later.
KLEIN: Now, what do you do? The first of the month, you have rent, you have bills to pay, you have automatic deposits. Boom, overdraft. Boom, overdraft.
PEASLEE: Klein estimates that 30 to 60% of overdraft fees could be eliminated with a real-time payment system like FedNow.
GARY RODRIGUES: We've been waiting for a real-time payment solution for a long time.
PEASLEE: Gary Rodrigues is the president and CEO of Star One Credit Union in Sunnyvale, Calif. His credit union is one of the early adopters of FedNow.
RODRIGUES: You know, most of the transactions occur in less than five seconds with a maximum of 20 seconds being the longest.
PEASLEE: And some apps out there might seem that fast, but they can have fees or if you want the money in your actual bank account, it can still take days through that old batch system. So Star One Credit Union is using FedNow for a new truly instant pay option for its members. But there's a catch. There are only about 100 banks signed up for FedNow so far out of about 9,000 financial institutions in the country.
RODRIGUES: I'm taken back a little bit by thinking that - I don't know why others aren't jumping in.
PEASLEE: So why would banks not want to let their customers send and receive money instantly?
MARY WILLIAMS: I mean, you hear the phrase faster payments, faster fraud.
PEASLEE: Mary Williams is COO at the United Bankers' Bank in Bloomington, Minn. She works with a lot of community banks, and some of them say they don't see a need yet, that customers aren't asking for it.
WILLIAMS: I think everybody's a little bit hesitant to be able to send too quickly when it hasn't really been up and running for a period of time.
PEASLEE: The Federal Reserve says the potential for fraud exists with any payment process, and they say it took the old system years to be fully adopted. So it can be slow going to get our money moving faster. Emma Peaslee, NPR News.
MARTÍNEZ: All right. You can hear more stories about the systems that make our economy flow on NPR's Planet Money. Find it wherever you get your podcasts.
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