FedNow is a real-time payment and settlement service developed by the Federal Reserve to enable financial institutions of all sizes to provide safe and efficient instant payment services.
FedNow aims to enable instant, 24/7 payments between financial institutions, enhancing the speed and efficiency of payment processing. It acts a bit like an arm of the Federal Reserve that implements technology originally created in the private sector via fintech companies to make transactions process immediately.
Is it publicly traded?
Is FedNow publicly traded?
FedNow is a service developed by the Federal Reserve and is not publicly traded. This means you cannot buy FedNow shares directly. However, there are several publicly traded companies that provide related services and infrastructure.
IPO
IPO
When will FedNow IPO?
FedNow is highly unlikely to IPO, considering that it's a service of the Federal Reserve. If you want to invest in the public offering of a company digital payments and transactions space, keep an eye on the upcoming IPO calendar.
How to invest
How to gain exposure to FedNow
FedNow is owned by the Federal Reserve, so it's not available for direct stock purchase. However, there are several companies whose stock might benefit from the widespread adoption of real-time payments. Here's how you can invest in companies related to FedNow:
Step 1: Open a brokerage account
The first step to investing in companies related to FedNow is to open a brokerage account. This account will allow you to buy and sell stocks, ETFs, and other securities. Many online brokers offer easy-to-use platforms and low fees, making them accessible to most investors. Here's what to look for when searching for brokers:
- Commission-free trades: Many brokers offer commission-free trading, which can save you money on each transaction.
- Low or no minimum deposit: Many brokers have eliminated their minimum deposit requirement, making investing easier for everyone.
- User-friendly platform: Choose a brokerage with a platform that is easy to use and navigate.
- Research tools and resources: Access to educational resources, stock analysis tools, and customer support can be very helpful, especially for new investors.
Step 2: Figure out your budget
Figuring out how much to realistically spend or how much you can absolutely afford to lose when investing is paramount before you put any money into anything, whether it be equities or real estate. Understanding how much you want to invest, as well as your investment strategy, should be at the forefront of your mind. For example, do you have a lump sum of cash that you want to invest now, or do you want to drip-feed your investment?
The other thing to consider is diversification. "Don't put all your eggs in one basket" is a motto everyone should live by when investing. It's important to diversify by investing across many companies and industries, as well as different asset classes. For example, you may want to invest mostly in stocks but also invest a small amount in Treasury bonds as part of an overall diversified investment strategy.
Step 3: Do your research
Research is key when it comes to investing. Here are three companies that provide exposure to the financial services payment industry or companies that stand to benefit from the rollout of FedNow.
Fiserv, Inc.
Fiserv Inc. (FI -1.41%) is a leading global provider of financial services technology, offering solutions in payment processing, financial risk management, and data analytics. Fiserv plays a significant role in the payment infrastructure, which is directly impacted by innovations like FedNow. The company's technology platform and its commitment to improving payment efficiency align closely with the objectives of FedNow.
Fintech
Jack Henry & Associates Inc.
Jack Henry & Associates Inc. (JKHY -2.34%) is a notable player in the fintech sector, providing payment processing services to many regional banks and credit unions. The company was an early adopter of the FedNow platform and has reported an increase in transaction volume for the service.
Amazon
Amazon Web Services (AWS), a subsidiary of Amazon.com (AMZN 1.52%), stands out in the cloud computing domain, offering scalable cloud infrastructure and services. It provides the majority of the "plumbing" for large corporations and government entities using large amounts of data in the U.S. As many financial institutions rely on AWS for their back-end systems, the company's cloud solutions could play a major role in supporting the infrastructure needed for FedNow.
Step 4: Place an order
Once you've opened your brokerage account, made a budget, and done your due diligence, it's time to place an order. Here are examples of different types of stock orders:
| Market orders | Executed immediately at the current market price. |
| Limit orders | Set a specific price limit; the order is executed only if the stock can be bought or sold at that price or better. |
| Stop orders | When a specific price threshold is reached, the order becomes a market order and is executed at the best available price. |
| Stop-limit orders | Combines features of stop and limit orders. When the stop price is reached, the order becomes a limit order rather than a market order. |
Profitability
Is Fed Now profitable?
FedNow is a service of the Federal Reserve, which posted a $1.143 billion dollar loss in 2023. The Fed is required to hand over any net income it earns to the U.S. Treasury. This unique structure helps the Fed to operate independently in its monetary policy decisions.
Should I invest?
Should I invest in FedNow-related stocks?
Investing in stocks related to FedNow could make sense, depending on your personal circumstances and investment strategy.
When you might consider investing in FedNow-related stocks:
You believe demand for digital payments will grow, but you're not into crypto. If you expect continuous growth in the demand for digital and real-time payments, companies related to FedNow, such as Fiserv, ACI Worldwide (ACIW -0.9%), and Mastercard (MA -1.81%), can be solid long-term investments. While cryptocurrency is a popular form of digital asset, digital payments serve a different function by facilitating financial transactions in a timely and orderly manner.
The goal of digital payment systems like FedNow is to speed up payment processing without creating a new form of currency. The Fed has stated that FedNow is not intended to be a digital currency or replace any type of currency, including cash.
You want to diversify your investments in the financial sector. Investing in companies that provide a wide range of financial services and payment solutions can help balance your portfolio and provide multiple revenue streams. Depending on whether the company pays a dividend, this could be for both growth-oriented and income-oriented investors.
When you might not want to invest in FedNow-related stocks
You're concerned about market saturation and too much competition in fintech. The financial technology sector is highly competitive, with numerous established players like PayPal (PYPL 2.2%) and Block (SQ -0.24%), plus a constant stream of new entrants. This intense competition makes it challenging for companies to maintain a competitive edge. If these companies struggle to differentiate themselves and capture significant market share, they may not produce high returns for investors.
You're looking for recession-resistant investments. Companies in the fintech sector tend to be especially sensitive to economic downturns, fluctuations in interest rates, and changes in consumer spending. For example, people spend less money during a recession, often leading to lower demand for services like payment processing.
You want high-risk, high-return investments. Even though the digital payment industry is moving quickly, many of the more established players will not have the same upside (or downside) potential of higher-risk investments, such as penny stocks, cryptocurrency, trading options, and other exotic financial products.
ETFs
ETFs with exposure to FedNow
Because FedNow isn't a publicly traded company, you won't find it listed among any ETF holdings. However, many ETFs include companies that provide similar services. Here are a few options:
| ETF ticker | ETF name | Focus | Assets under management | Expense ratio |
|---|---|---|---|---|
| (NYSEMKT:ARKF) | ARK Fintech Innovation ETF |
Focuses on fintech innovations, including digital payments and mobile banking companies like Square and PayPal. |
$893.5 million | 0.75% |
| (NASDAQ:FINX) | Global X FinTech ETF |
Invests in companies involved in financial technology, including payment processors and financial software firms. |
$290.2 million | 0.68% |
| (NYSEMKT:IPAY) | ETFMG Prime Mobile Payments ETF |
Narrow focus on mobile payments, including major players like Visa, Mastercard, and Square. |
$285.9 million | 0.75% |
| (NYSEMKT:BLOK) | Amplify Transformational Data Sharing ETF |
Focuses on blockchain technology, which underpins many digital payment systems. |
$692.2 million | 0.76% |
| (NYSEMKT:IHAK) | iShares Cybersecurity and Tech ETF |
Includes companies that provide cybersecurity for financial transactions, crucial for digital payments and fintech. |
$813.5 million | 0.47% |
Related investing topics
The bottom line on investing in FedNow
FedNow is a payment platform that's operated by the Federal Reserve. However, the digital payments and fintech industry have plenty of options for investing in companies that provide a similar service to FedNow, as well as those that will benefit from the rise of digital payments.
FAQ
Investing in FedNow FAQ
Can I buy stock in the Federal Reserve?
You cannot buy stock in the Federal Reserve. The Federal Reserve is the central bank of the United States and is not a publicly traded entity. It mostly operates independently of the government, and its primary functions are to manage monetary policy, regulate banks, maintain financial stability, and provide banking services to depository institutions and the federal government.
Can individuals use FedNow?
Consumers and businesses will access the FedNow service via their bank or credit union's mobile app or online banking platform. Its purpose is to speed up the financial ecosystem as a whole. It's important to note that the Fed has stipulated that it won't work directly with individuals. Instead, it will be in the bank's hands whether or not they will offer the service to individuals.
Who is the owner of FedNow?
The FedNow service is owned and operated by the Federal Reserve. Although the Federal Reserve is technically an independent bank, the Federal Reserve System is subject to congressional oversight.
Can I invest in FedNow?
You cannot directly invest in FedNow since it is a service provided by the Federal Reserve, which is not a publicly traded entity. However, you can invest in companies that will likely benefit from or contribute to the FedNow infrastructure, such as financial technology firms and payment processing companies.
