Fed eyes actions to promote faster payments; comments due Dec. 14

Two actions the Federal Reserve Board could take to support real-time interbank settlement of faster payments in the United States are detailed in a request for comments issued Wednesday under a public comment deadline of Dec. 14.

The potential actions, the Fed says, could support the further development of faster payments in the United States while increasing the resiliency and security of services offered to the public. The two actions are:

1) the development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year (24x7x365); and

2) the creation of 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, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.

The potential actions build on collaborative work with the payment industry through the Federal Reserve System’s Strategies for Improving the U.S. Payment System (SIPS) initiative, the Fed said in its release Wednesday. The board is not committing to any specific action, the agency said, but it is seeking input on which, if any, actions the Fed should take.

“Consumers and businesses increasingly expect to be able to send and immediately receive payments at any time of the day, any day of the year,” Federal Reserve Board Gov. Lael Brainard said during a speech Wednesday in Chicago. “A 24/7 economy with 24/7 real-time payments needs 24/7 real-time settlement. That is where we believe that the Federal Reserve and the private sector together need to make investments for the future.”

The Fed notes that faster payment services offer convenience (for example, allowing on-the-spot payments using mobile phone applications) as well as flexibility in money management (since funds can be sent and received at any time, any day).

“Real-time settlement avoids interbank credit risk by aligning the speed of interbank settlement with the speed of underlying payments. As a result, broad use of real-time settlement for faster payments could enhance the overall safety of the faster payments market in the United States,” the Fed noted. “Development of a nationwide real-time interbank settlement infrastructure by the Federal Reserve could encourage more banks to develop faster payment services, creating more choice for consumers, households, and businesses.”

The Fed added that a liquidity management tool could improve the level of participation by banks in a real-time settlement infrastructure for faster payments and, in turn, public access to faster payment services by mitigating risk that may arise for banks outside standard business hours.

Request for comments

Federal Reserve Board seeks public comment on potential actions to facilitate real-time interbank settlement of faster payments