On Thursday, the U.S. Federal Reserve introduced an exciting new service to upgrade the country’s payment system. The aim is to make it possible for regular Americans to send and receive money in just seconds, 24/7. This is a big step in making our financial system more modern and accessible to everyone.

The “FedNow” service, which has been developing since 2019, is designed to speed up cash transfers. It aims to eliminate the typical several-day wait for settling transfers, aligning the United States with other countries like the United Kingdom, India, Brazil, and the European Union that already have similar services in place for years. The purpose is to make money transfers faster and more convenient for people in the U.S.

FedNow is set to begin its operations with 41 banks and 15 certified service providers, which includes both community banks and prominent lenders like JPMorgan Chase (NYSE:JPM), Bank of New York Mellon (NYSE:BK), and US Bancorp (NYSE:USB). Nonetheless, the Federal Reserve intends to further expand its reach by onboarding more banks and credit unions in the current year.

The Fed said on Thursday in a statement that 35 banks and credit unions were utilizing the service and the Treasury Department’s Bureau of Fiscal Service.

The service will compete with private sector real-time payments systems, including The Clearing House’s RTP network, and was initially opposed by big banks who said it was redundant. But many have since agreed to participate on the basis FedNow will allow them to expand the services they can offer clients.

“For us, FedNow really is a wonderful way of expanding reach,” said Anu Somani, head of global payables and embedded payments at U.S. Bank.

Unlike peer-to-peer payment services such as Venmo or PayPal (NASDAQ:PYPL), which act as middlemen between banks, payments made through FedNow will be directly settled in central bank accounts.

The Fed also has a real-time payments system called FedWire, but it is mainly used for large-scale corporate payments and operates only during business hours. In contrast, the new FedNow system is open to everyone and is expected to provide the most advantages to consumers and small businesses, according to analysts.

“We want our clients to benefit from these capabilities, and we want that to be a competitive edge for us,” said Carl Slabicki, global co-head of payments for BNY Mellon’s Treasury Services.

Smaller banks, which often connect to FedWire via larger lenders, encouraged the Fed to develop FedNow, arguing that it would allow them access to real-time payments without paying larger competitors for the service.

According to Lance Noggle, the senior vice president of operations and senior regulatory counsel at the Independent Community Bankers (NASDAQ:ESXB) of America, a trade group, having the Fed involved in the space makes their members feel more comfortable. They believe their needs will be met and can expect fair service pricing.

FedNow will not charge consumers, although it’s unclear whether or how participating banks will pass on any costs associated with the service.

Democratic Senator Chris Van Hollen, who had urged the Fed to develop a real-time payments system, said that the launch of FedNow is “good news for American consumers and our economy.”

“FedNow’s launch will connect Americans with their money in real-time, saving consumers billions annually,” he stated.

Some market participants have raised concerns that FedNow could super-charge a potential bank run by facilitating fast outflows from financial institutions, a fear that was amplified after the failure of Silicon Valley Bank earlier this year.

But Fed officials have downplayed those concerns, arguing that banks have tools available to mitigate a wave of outflows.

At the outset, FedNow will have a maximum payment limit of $500,000, but banks can choose to lower that cap if need be.