Fed Chairman Backs Real-Time Payments
In a letter to Congress, Federal Reserve Chairman Jerome Powell indicated that the U.S. Federal Reserve (Fed) was “seriously considering” a real-time payments system, and that the Fed was uniquely structured to oversee the implementation of such a system.
Over the past several years, the Fed has faced pressure to develop a real-time payments system, including multiple letters from Congress sent to Chairman Powell urging him to develop a faster payments system, with the hope that it would benefit those living paycheck-to-paycheck.
The Fed issued a request for comments last year seeking input on “a service for 24x7x365 real-time interbank settlement of faster payments; and a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments” and whether these actions would “help achieve ubiquitous, nationwide access to safe and efficient faster payments.”
More than 400 comments were submitted, of which more than 90 percent supported the Fed developing a real-time gross settlement service that would speed up payments.
Big banks have already invested $1 billion in their own network, which uses the Clearing House Payments Co. However, the Fed said that the private sector initiative faces several downsides. For instance, “a single private-sector provider of such services is unlikely to connect to the thousands of small and midsize banks necessary to yield nationwide reach, even in the long term.”
Nonetheless, Chairman Powell stated that the Fed would explore ways to make their faster payments system interoperable with the private sector initiative. For next steps, the Fed plans to continue seeking public comments through the formal rulemaking process.