Payment rails are the infrastructure that enables the transfer of money between banks, payment service providers, and other financial institutions. For businesses, selecting the right payment rail depends on factors like speed, cost, geography, and customer satisfaction.
FedNow and Cash App are examples of modern payment rails that offer real-time transactions and user-friendly interfaces. Lightspark aims to transcend these traditional systems by introducing the Money Grid, a global, open network built on Bitcoin’s decentralized foundation.
The Payment Rail Landscape
Payment rails are crucial for moving money between parties, but current systems can be slow, fragmented, and costly, often leading to inefficiencies and higher transaction fees for businesses and consumers alike.
Understanding FedNow and Cash App
How FedNow Works
The FedNow Service, developed by the United States Federal Reserve Bank, operates 24/7/365 to provide instant payments with integrated clearing functionality. A typical transaction involves the payer initiating a payment through their financial institution, which then submits the payment to FedNow. FedNow validates and forwards the message to the payee’s institution for acceptance. Upon acceptance, funds are immediately transferred and all parties are notified. The service uses ISO 20022 standards, supports Requests for Payment (RfP), and includes fraud prevention tools, ensuring secure and efficient real-time transactions.
Strengths and Limitations of FedNow
Strengths
- FedNow offers 24/7/365 availability, ensuring uninterrupted processing without nightly, weekend, or holiday restrictions.
- It provides real-time funds availability, allowing payments to be completed within seconds, which improves cash flow and financial agility for businesses.
- As a Federal Reserve-backed service, FedNow is designed to be secure and efficient, promoting industry-wide security standards and fraud prevention tools.
Limitations
- FedNow transactions are limited to a maximum value, unlike Fedwire, which does not impose such limits.
- The service is not a replacement for ACH or Same Day ACH, as it is intended to complement these systems rather than replace them.
- Access to FedNow is limited to depository institutions eligible to hold accounts at the Reserve Banks, excluding direct participation by merchants, consumers, or non-bank payment service providers.
How Cash App Works
Cash App operates as a financial services platform, not a bank, partnering with banks for services like direct deposits and issuing prepaid debit cards. Users download the app, create an account, and link a debit card or bank account. They can send money using a phone number or email, receive funds instantly, and transfer money to a linked account. The app employs encryption and fraud detection technology, ensuring secure transactions. A typical transaction involves logging in, selecting send or receive, entering the recipient’s details, and confirming the amount. Funds are available instantly in the recipient’s Cash App balance.
Strengths and Limitations of Cash App
Strengths
- No fees for sending or receiving money from a personal Cash App account using balance or linked debit card.
- Ability to buy and sell bitcoin and stocks with no commission fees.
- Highly rated on Trustpilot, App Store, and Google Play, indicating strong user satisfaction.
Limitations
- 3% fee applies when sending money from a linked credit card.
- Only residents of the United States can create Cash App accounts.
- Funds are held within the app's digital wallet rather than being transferred directly between bank accounts.
FedNow and Cash App Compared
Transaction Speed
FedNow offers near-instant transaction speeds, with funds typically available within seconds and no longer than 60 seconds. Cash App also provides instant peer-to-peer transactions, but specific timing details are not provided. Lightspark, leveraging the Lightning Network, promises real-time, global money movement, ensuring transactions are completed instantly.
Fees
FedNow is noted for its low transaction costs, though specific fees are not detailed and may vary by institution. Cash App charges no fees for personal transactions using a balance or linked debit card but imposes a 3% fee for credit card transactions. Lightspark emphasizes low-cost payments, moving money at a fraction of traditional costs with no hidden fees.
Cross-Border Capabilities
FedNow is limited to domestic transactions within the United States, with no cross-border capabilities. Similarly, Cash App does not support international transactions. In contrast, Lightspark facilitates seamless, low-cost payments across borders, supporting 94+ countries and 75+ currencies.
Security Protocols
FedNow employs robust security measures, including fraud prevention tools and user approval for transactions. Cash App uses encryption and fraud detection technology but lacks detailed security protocol information. Lightspark, built on Bitcoin’s decentralized foundation, offers strong security through blockchain technology and self-custodial wallets.
Operational Hours
FedNow operates 24/7/365, ensuring continuous availability for transactions. Cash App implies constant availability but does not explicitly state 24/7/365 operation. Lightspark’s infrastructure is described as "always on," enabling real-time, uninterrupted global money movement.
How FedNow And Cash App Are Used
Business-to-Business (B2B) Payments
FedNow is ideal for B2B payments, offering instant bank-to-bank transfers, enhancing cash flow and operational efficiency. Cash App, designed for P2P transactions, lacks this capability. Lightspark excels by enabling instant, low-cost cross-border B2B payments, supporting multiple currencies and reducing transaction fees.
Urgent Supplier Payments
FedNow allows businesses to pay suppliers instantly, ensuring timely order processing. Cash App is less suitable due to its consumer focus. Lightspark's real-time global payments ensure suppliers worldwide receive funds instantly, minimizing delays and operational disruptions.
Peer-to-Peer (P2P) Consumer Payments
Cash App is perfect for P2P payments, offering instant transfers using phone numbers or emails. FedNow is less suited for casual consumer use. Lightspark, while not primarily for P2P, provides a secure, low-cost alternative for international P2P transactions, leveraging the Lightning Network.
Earned Wage Access (EWA)
FedNow supports real-time payroll disbursement, helping employees access wages instantly. Cash App does not cater to this use case. Lightspark offers a global solution, enabling instant wage access across borders, reducing reliance on payday loans and enhancing financial inclusion.
Time for a New Standard
Lightspark offers a global payments infrastructure built on Bitcoin, enabling real-time, low-cost, and secure money movement across borders, surpassing the domestic limitations of FedNow and the consumer focus of Cash App.
- Built on Bitcoin: Lightspark’s infrastructure leverages Bitcoin’s decentralized foundation, integrating with the Lightning Network for instant, low-cost transfers.
- Instant Settlement: The Money Grid network ensures real-time, global money movement for Bitcoin, fiat, and stablecoins, with no delays.
- Lower fees: Lightspark facilitates money movement at a fraction of traditional costs, with no hidden fees.
- Cross-border security by default: The platform provides secure, instant payments across borders, utilizing Bitcoin’s cryptographic security and self-custodial wallets.
A Modern Infrastructure
For businesses looking to transcend legacy payment systems like FedNow and Cash App, here’s what Lightspark has to offer:
- Wallets: Enables businesses and developers to build advanced digital wallets with real-time access to Bitcoin, the Lightning Network, stablecoins, and domestic payment rails.
- Digital Banks: Connects digital banks to the 'Money Grid,' allowing them to expand into new markets, move money 24/7, and stay competitive with real-time, low-cost payments.
- Exchanges: Provides cryptocurrency exchanges with seamless integration to the Bitcoin Network, enabling instant, low-cost Bitcoin transfers and built-in compliance tools.
- Stablecoins: Through Spark, businesses can create, distribute, and monetize their own stablecoins on the Bitcoin network, offering a modern alternative to traditional payment systems.
Emerging technologies and evolving regulations are reshaping the future of payments. Lightspark offers real-time, low-cost global payments, bridging traditional and next-gen systems. Don’t just choose between two outdated options—upgrade to a payment rail built for the internet age. Learn more or book a demo.
