Fed To Create Payments System To Speed Money Transfers (#GotBitcoin?)
Move will provide a public option to another real-time network built by big banks. Fed To Create Payments System To Speed Money Transfers (#GotBitcoin?)
The Federal Reserve plans to develop a faster payments system for banks to exchange money, providing a public option to another real-time network built by big banks.
The new system would allow bill payments, paychecks and other common consumer or business transfers to be available instantly and round-the-clock, a change from the government’s current system that is closed on weekends and can at times take days to settle a transaction.
“Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community,” Fed Gov. Lael Brainard said in a speech at the Federal Reserve Bank of Kansas City Monday.
The Fed voted 4-1 to build the new network with Vice Chairman for Supervision Randal Quarles dissenting.
Big banks had waged a lobbying effort to stop the Fed from developing the new system. The banks, including Citigroup Inc., U.S. Bancorp and JPMorgan Chase & Co., have invested a total of about $1 billion in their own instant-payments system, launched in 2017 and operated by Clearing House Payments Co. They argued a competing Fed system would delay the spread of faster payments, with some smaller banks likely to wait until the central bank launches its system. The Fed said it anticipates that the new service will be available in 2023 or 2024, and will support payments of up to $25,000.
Many community banks, as well as retailers such as Walmart Inc., have encouraged the Fed to move forward with a faster government network.
The Fed said it in part decided to move ahead with the project because it predicted the Clearing House system would remain the only faster-payments provider if it didn’t enter the fray.
Providing a second option in the market would lower costs, improve efficiency and reduce the vulnerability of the financial system, creating “resiliency through redundancy,” the Fed said.
The Fed also said it was considering expanding the operating hours of its existing payments systems, including the settlement service for wire transfers, by offering limited availability during holiday and weekends or allowing them to run round-the-clock.
Thousands of community banks still don’t have access to a real-time settlement system for small consumer and business transfers at a time when PayPal Holdings Inc. ’s Venmo and other technologies allow users to send money instantly.
The banking industry is also facing competition from other payments technologies that are outside the traditional financial system, such as Facebook Inc. ’s cryptocurrency project Libra.
“One thing is clear: consumers and businesses across the country want and expect real-time payments, and the banks they trust should be able to provide this service securely—whatever their size,” Ms. Brainard said. Fed To Create Payments,Fed To Create Payments