By Suzanne Cosgrove
CHICAGO (MaceNews) – The Federal Reserve is moving quickly to design and implement its real-time payment system, known as FedNow, Kansas City Federal Reserve Bank President Esther George said Tuesday.
“Work is under way now to engage with industry participants on the initial design and features of the service,” George said.
George’s comments focused largely on plans for a real-time payment infrastructure, which she called “the nation’s most significant modernization in more than 40 years,” but she also gave a nod to digital currencies. The Kansas City Fed president did not touch on monetary policy in her remarks.
“Determining what role they might play in safely and effectively serving the broader payments needs of U.S . households and businesses will require careful public policy research and analysis,” she said.
Speaking to a conference on payments held at the Federal Reserve Bank of Chicago, George said the payments landscape is evolving quickly because of a desire for speed and convenience, and faster payments offer real economic benefits.
“In particular, individuals and businesses could realize more flexibility to manage their money and to make time-sensitive payments whenever needed,” George said. “These advantages could result in better cash flow management and efficiencies for small businesses, and enable some individuals to avoid high-cost borrowing and penalties such as overdraft or late fees. ‘
The Federal Reserve Board of Governors announced its decision to operate a real-time payment service alongside the private sector earlier this year. The decision to build the system followed years of research and analysis, George said, and included broad public engagement.
“Recognizing that time to market is important, the Federal Reserve has committed to launching this new service, known as FedNow, as soon as possible,” she said, although she acknowledged that connecting more than 10,000 financial institutions to a faster payment system will take time.
“As prominence of faster payments in the United States grows, the development of the FedNow Service will allow the Federal Reserve to retain its ability to provide stability and support the banking system and the broader economy,” George said.