AP Photo/Cliff Owen
- The Federal Reserve announced Monday it would develop a payment system that would allow bank payments and transfers to be made instantly and round-the-clock.
- Bank customers currently have to wait up to several days for transactions to pull through, a slower pace than in many major economies.
- The announcement came after major pushback effort from some of the largest banks, which have launched their own efforts to build such a system.
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The Federal Reserve wants you to get payments faster.
The central bank announced Monday it would develop a system that would allow bank payments and transfers to be made instantly and round-the-clock.
Bank customers currently have to wait up to several days for transactions to pull through, a slower pace than in many major economies. Faster access to funds could be especially important for households on fixed incomes or living paycheck to paycheck, according to Fed Governor Lael Brainard.
"Waiting days for the funds to be available to pay a bill can mean overdraft fees or late fees that can compound," she said in a speech announcing the payment plan. "Similarly, getting immediate access to funds from a sale in order to pay for supplies can be a game changer for small businesses, potentially avoiding the need for costly short-term financing."
Policymakers voted 4-1 for the real-time payment system, called FedNow Service, with Vice Chairman for Supervision Randal Quarles dissenting. It’s expected to be available by 2024.
The announcement came after major pushback effort from some of the largest banks, which have launched their own efforts to build such a system. Those private financial institutions argue the Fed could actually slow down the transition.
Greg Baer, the president and chief executive of the financial-lobbying Bank Policy Institute, told POLITICO last month "the Federal Reserve may pull a bait and switch and build its own system — certainly delaying and perhaps completely undermining the goal of a ubiquitous system where any U.S. consumer or business can pay any other."
Members of Congress have conversely pressed the Fed for a faster payment system, saying that delays imposed unfair burdens on consumers. In July, a group of Democrats introduced a bill that would require monetary policymakers to create one.
"For far too long, consumers and small businesses have unfairly shouldered the costs of our slow payments system – despite the fact that we have the technology to update it and a clear and urgent need to do so," Senator Chris Van Hollen of Maryland said last month. "I’ve pushed the Federal Reserve to develop a system that has the necessary guardrails, but progress there has been too slow."
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