Fed's faster payments network likely ahead of schedule: Powell

WASHINGTON — Federal Reserve Chairman Jerome Powell told members of Congress Thursday that he believes the central bank's faster payments system could be operational in “three or four” years rather than the five years that the agency initially projected.

Speaking before the House Budget Committee, Powell said the FedNow system was a “top priority” for the agency and he expects it to be completed ahead of schedule.

“We don’t think it will take five years,” Powell said. “We’re thinking three or four. We want to do it right. It’s a complicated project, it’s very important, it’s a top priority for us. Getting it right the first time is key. So we want to have it up and running within three to four years.”

The Fed had been examining what to do about the slow speed of the national payments system for years. But as the agency was studying the issue, The Clearing House — a consortium of the largest banks — developed and launched its own faster payments system in November 2017.

Amid mounting pressure from community banks and their allies in Congress, the Fed announced in August that it would build its own faster payments network, known as FedNow, and that the network would be up and running by 2023 or 2024.

The Fed’s entry into the faster payments world was greeted warmly by some observers who argue that the central bank can ensure that smaller and more remote financial institutions won’t be left behind by the larger-bank-owned payments system. But detractors cast the move as an impending disaster, arguing among other things that the timetable for the deployment of FedNow was too long.