The Federal Reserve expects to launch a new system this month aiming to make payments in the U.S. banking system available immediately, around the clock. Although it is a boon to consumers and many businesses, some analysts warn that FedNow could destabilize banks’ reliance on customer cash, fanning the flames of deposit flight that became the bane of several regional banks this spring.
“People aren’t paying enough attention to the century-old business model around midsize banking—it is absolutely challenged,” Menai added. “There is no borrowing cheap anymore.”