The providing of settlement services is being considered by the Federal Reserve to address “the future needs of a ubiquitous real-time retail payments environment,” a governor of the central bank’s board told a central banking group Wednesday meeting in New York.
Speaking to the 41st Annual Central Banking Seminar, sponsored by the Federal Reserve Bank of New York, Federal Reserve Gov. Jerome H. Powell said in considering the settlement services – “a traditional core function of a central bank” – the agency plans to engage with the financial services industry and other stakeholders to comprehend gaps and requirements for real-time retail payments settlement and assess alternative models that will support needs over the long term.
The Fed will also consider the needs of any other services or capabilities, Powell said.
“In carrying out this assessment, we will be guided by current and potential market developments and challenges, as well as our long-established criteria for offering new products and services,” Powell said. “These criteria include the need to fully recover costs over the long term; the expectation that the new service will yield clear public benefit; and the expectation that other providers alone cannot be expected to provide the service with a reasonable effectiveness, scope, and equity.”
In other comments, the governor said the central bank would launch two security efforts: a study analyzing payment security vulnerabilities (in early 2018), and establishing work groups focused on reducing the cost and prevalence of specific payment security vulnerabilities. “
“In a world of ever-escalating threats to the integrity of our payment system, this collective action is needed to sustain public confidence,” Powell said.