- Federal Reserve to develop new faster payments system
- Speech by Lael Brainard seen as positive by many bankers
- Despite this, journalists have sounded alarm bells
Leaders in the US payments industry have responded to an announcement from the Federal Reserve that real-time access to online money transfers will soon become faster.
A recent speech from Lael Brainard, who sits of the Federal Reserve’s Board of Governors, covered the thorny issue of real-time payments.
Not all banks and payments providers permit people to access their accounts all the time, meaning that some people are left for days without access to cash.
In her speech, Brainard outlined just some of the groups which are affected currently by what she perceived to be a flaw in America’s payments system - she highlighted low-income families and small to medium-sized businesses as just two.
“Immediate access to funds could be especially important for households on fixed incomes or living paycheck to paycheck, when waiting days for the funds to be available to pay a bill can mean overdraft fees or late fees that can compound”, she said during the speech, which was delivered in Kansas City alongside the local Federal Reserve Bank President.
“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”, she added.
She promised that a “Federal Reserve real-time retail payment infrastructure” would be on the way soon.
This remittance service will be known as FedNow, and is currently in development by the central bank.
Since then, many big names in the payment industry have shared their views.
Rob Nichols, President of the American Bankers Association (ABA), was positive.
“Every bank and their customers will benefit from a seamless and ubiquitous [real-time payments] system”, he argued.
“The reality is that any Fed-built system will take some time to build, so in the meantime, ABA will continue to encourage all banks to consider whether to connect to the existing Real-Time Payments network offered by The Clearing House. We believe any Fed system must be fully interoperable with the RTP network, [and] remain accessible only to chartered financial institutions.”
Some journalists have pointed out flaws in the proposed new system and have identified areas in which challenges are left hanging without being adequately addressed.
According to Ron Shevlin, a Fintech writer who writes for Forbes, the main challenge for those looking to do their banking in a more efficient way is overdraft fees.
He asked in his recent article whether a sped-up payments system could lead to fewer people going into their overdrafts – and, hence, whether banks would put up fees in other areas in order to compensate for fewer fees derived from overdrafts.
If you’re interested in keeping up to date on the latest developments in the development of a payments infrastructure for the future, check out our news pages for moreinformation.
