Fed’s Brainard: Nationwide, real-time payment system ‘significantly improves’ prospect of faster payments for all sizes of FIs

Developing a nationwide, real-time interbank settlement payment system would “significantly improve” the prospect that a financial institution of any size would have access to faster payments, and keep the United States apace with other nations that are close to or completing their own systems, a Federal Reserve Board governor said Wednesday.

In a speech, Fed Board Gov. Lael Brainard told the Fed Payments Improvement Community Forum in Chicago that the comment call the central bank released Wednesday seeks public input on potential steps the Fed could take to support the vision of real-time gross settlement (RTGS) system of faster payments.

“The Reserve Banks could develop a service for RTGS that is available on a 24/7 basis to provide payment-by-payment interbank settlement in real time and at any time, on any day, including weekends and holidays,” she said, noting that the Reserve Banks now provide payment services to more than 11,000 banks across the country. “A 24/7 RTGS service provided by the Reserve Banks could significantly improve the prospect that banks of all sizes will have equitable access to a real-time interbank settlement infrastructure for faster payments in the long term.”

She suggested that the Fed and the private sector can work together to make investments for the future. “In this regard, the U.S. retail payment system lags behind some other countries,” she said. “The Reserve Bank of Australia and the European Central Bank have already implemented or are on the cusp of implementing RTGS systems to support private-sector faster payment services.”

Brainard told the group that developing a nationwide real-time interbank settlement infrastructure could also support the development of private-sector faster payment services, “thereby increasing innovation and choice in the market.” She said all-sized banks and technology providers could develop new services or enhance existing services by capitalizing on the underlying interbank settlement infrastructure. “This could ultimately benefit all consumers by lowering costs, increasing choice, and improving quality,” she said.

“In that regard, we are also seeking comment on whether the Reserve Banks should consider developing a liquidity management tool that would operate 24/7 in support of services for real-time interbank settlement of faster payments. The tool could support settlement services provided by the private sector or the Reserve Banks,” she said.

Speech by Governor Brainard on supporting fast payments for all