Fed Pushes Ahead on Faster Payments Initiative

The regional Federal Reserve banks are trying to maintain momentum in their efforts to improve the U.S. payment system.

The Fed's financial services policy committee on Thursday reiterated its commitment to the work, which focuses largely on the development of a faster nationwide payment system.

The update came three weeks before the Federal Reserve Bank of Chicago's annual payments symposium, where efforts to speed up payments are sure to be a major topic. The U.S. has fallen far behind numerous countries — most visibly the United Kingdom, but many others as well — where electronic payments are completed in a matter of seconds.

Fed officials will prepare and share a road map for improvements to the U.S. payment system "in the coming months," the committee said in a news release.

The Fed plans to publish the road map before yearend, added a spokeswoman for the Minneapolis Fed, whose president, Narayana Kocherlakota, chairs the committee. She was reiterating a timeline the committee announced back in February.

For more than a year, the regional Fed banks have been working to build support for their vision of a system in which every U.S. bank processes payments in something near real-time. The banks established a 10-year timeline for the realization of that vision in a white paper released last fall.

Since the white paper's publication, the Fed banks have solicited comments from bankers and other interested parties, and also held a series of town hall events around the country. In August, the Fed published three new documents, including a summary of the town hall events, which are intended to advance the public discussion.

In Thursday's release, the Fed's financial services policy committee said that it has completed research projects on the need for faster retail payments and on two other topics related to improving the U.S. payment system.

"The tremendous participation in our research initiatives and attendance and engagement at our forums is a testament to the focus and energy around these critical payment issues," Gordon Werkema, first vice president at the Chicago Fed, said in the release.

Kocherlakota said in the release that staff and leaders from the Federal Reserve System are working diligently on how to improve the nation's payment system.

He added that the Fed looks forward to "ongoing collaboration with stakeholders this year and beyond to improve the ability of the U.S. payment system to meet evolving end-user needs for speed, efficiency and security."

The Fed's efforts in this area follow the 2012 demise of a private sector proposal to require banks to process automated clearinghouse transactions on the same day they're initiated, rather than the following day. The industry group that spearheaded that proposal, Nacha, is now pushing a revised version of that plan.