Even as consumers conduct commerce and pay with taps and swipes the Federal Reserves infrastructure underpinning payments could use a bit of modernization in a bid to support fast payments for all Federal Reserve Governor Lael Brainard said in remarks made Wednesday Oct 3 To that end the Federal Reserve is seeking public comment on what she said could be potential steps that could be taken by the Fed to support the vision of RTGS real-time gross settlement of faster payments Brainard speaking in Chicago at the Fed Payments Improvement Community Forum said in her remarks that while we are seeing a growing demand for payments to be as instantaneous as the apps on our smartphones the reality is a bit starker as payments rely on what she termed a patchwork of systems that operating behind the scenes can result in inefficiencies and delays and where access can be uneven as well With a bit of history setting the stage for a discussion of RTGS Brainard said the Fed was created in tandem with Congress desire to create a reliable payments infrastructure Though Americans now take the reliability and safety of payments for granted she stated that in the past fragmentation of payments wending their way through various systems and banks and of course via paper check imposed costs and delays that impacted all stakeholders from banks to consumers By the 1970s Brainard said inefficiencies and the sheer volume of checks along with the expensive process of clearing those checks represented a time bomb that demanded attention and technology Thus the joint efforts decades ago between the Fed and the private sector yielded the ACH system which still exists as a vital conduit to reliable payments and access to funds Crossroads in Payments But Brainard told observers the US payment system stands again at a crossroads There exists a disconnect she said between the expectations for speed and accessibility in payments born of the digital age and underlying settlement abilities which are tied to a deferred settlement system By embracing RTGS said the Fed governor risk decreases and safety increases Payments speed of course would get a boost The Fed she noted has a responsibility to offer payment systems that serve the needs of the public at large and the systems at present do not work in a real-time 24 7 payments environment Faster payment services are emerging that allow enterprises and individuals to manage their finances with efficiency The capability to finalize interbank settlement before funds are made available to the recipient would avoid an undesirable level of risk she contended That risk stands out in times of financial stress as transferring funds between banks is not instantaneous but acts as an IOU of sorts The call for public comment is being published in the Federal Register and as Brainard said reserve banks could by way of example develop a service for RTGS that would be available 24 7 settling funds flow on a payment-by-payment basis and with interbank settlement that can be done even on weekends and holidays Such initiatives she said could ultimately benefit all consumers by lowering costs increasing choice and improving quality Faster payments can be important for households and small business owners which have in the past faced constraints on cash flow As Brainard noted surveys have found that as many as 40 percent of adults in the US would need to borrow or raise funds by selling items Real-time payments could also help stakeholders sidestep overdraft fees or collections efforts or the need for SMBs to tap short-term financing The Feds Role Brainard noted that the Feds faster payments initiative began five years ago with a continuing dialogue between 300 organizations across banks card firms tech firms and consumers Ensuing examination and assessment of the payments infrastructure has found that interbank settlement in real time what we refer to as real-time gross settlement offers benefits She also pointed out that at present the United States lags behind some other countries in embracing such faster payments initiatives Brainard pointed specifically to the Reserve Bank of Australia and the European Central Bank where real-time gross settlement already has or will underpin private sector faster payments services The Federal Reserve banks provide payment services to more than 11 000 banks nationwide stated Brainard A 24 7 real-time gross settlement option provided by the Reserve she added could significantly improve equitable access to infrastructure which can foster faster payments The Fed is also seeking comment on the possibility of developing what Brainard called a liquidity management tool that would operate 24 7 and which would underpin services for real-time interbank settlement of faster payments YOU MIGHT ALSO LIKE Related Items 24 7 payments ACH cash flow faster payments Featured News federal reserve News payment speed real time gross settlement real time payments