Fed still shooting for late ’23 (or ’24) launch for round-the-clock fast payments system

Late 2023 or 2024 remains the target date for the launch of the Federal Reserve’s round-the-clock payments system, “FedNow,” the chair of the agency’s board affirmed in comments Thursday.

Speaking to a conference hosted by the Committee on Payments and Market Infrastructures in Basel, Switzerland (via prerecorded video), Fed Chair Jerome H. (“Jay”) Powell said his agency remains on track to roll out its instant or fast-payments system within two years. He said the service will be designed to maintain uninterrupted processing 24 hours a day, seven days a week, 365 days a year with security features designed to ensure payment integrity and data security.

Powell also gave a nod to the private sector’s efforts to improve the payments system. He said the sector “has the experience and expertise to develop consumer-facing infrastructure that improves and simplifies how the public engages with the financial system.” He added that “digitalization” of financial services, combined with an improved consumer experience, can help increase financial inclusion, particularly in countries or areas with large unbanked populations.

In other comments, Powell said the Fed is working to examine the role of new payment technologies, including central bank digital currencies (CBDCs). He said the Fed is experimenting with the CBDCs, with complementary efforts underway by the Federal Reserve Bank of Boston in collaboration with the Massachusetts Institute of Technology (MIT).

He said a recent report from the Bank for International Settlements and a group of seven central banks (including the Fed), assessed the feasibility of CBDCs in helping the banks deliver public policy objectives. “Relevant to today’s topic, one of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system,” he said.

Chair Jerome H. Powell: Closing remarks at conference hosted by the Committee on Payments and Market Infrastructures