The U.S. Federal Reserve announced on Monday it planned to develop its own round-the-clock real-time payments and settlement service, with an expected launch in 2023 or 2024, APA reports citing CNBC.
In a statement, the U.S. central bank said it was seeking public comment on the project, saying near-instantaneous transfer of funds 24 hours a day could yield economic benefits for individuals and businesses.
The new service, dubbed FedNow, would operate alongside a private real-time payments system established by a group of large banks in 2017.
It is likely to be met with praise from smaller banks who had called for the Fed to build such a system, but criticism from larger banks that have already built their own private infrastructure.
Fed Governor Lael Brainard said the Fed-run service would provide necessary competition, help ensure banks of all sizes have access to instant payment services and improve the overall safety of the financial system.
“The U.S. real-time retail payment infrastructure stands to gain from the competition, including through higher service quality and lower prices over the long run,” Brainard said in prepared remarks for an event in Kansas City.
In 2017, The Clearing House, a consortium of large banks, created its own real-time payments system. But smaller banks have resisted signing up, waiting to see if the Fed would offer a similar service that would not be operated by direct competitors.
The current system operates under a similar structure, with the Fed and The Clearing House operating parallel services that can take several days to clear payments across financial institutions. Brainard said the Fed does not plan to stifle the privately-run system, and instead wants to continue cooperating with private-sector services while fostering competition.
The Fed has studied real-time payments for several years, establishing a task force in 2015. And in October, it solicited public comment on building its own real-time payments system.
Brainard said 90 percent of the comments it received supported the Fed building its own system.
The Fed also said it was exploring the expansion of its Fedwire Funds Service and National Settlement Service to operate 24 hours a day every day of the year.
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