Fed to Create Payments System to Speed Money Transfers

Lael Brainard, governor of the Federal Reserve


Photo:

Andrew Harrer/Bloomberg News

WASHINGTON—The Federal Reserve plans to develop a faster payments system for banks to exchange money, providing a public option to another real-time network built by big banks.

The new system would allow bill payments, paychecks and other common consumer or business transfers to be available instantly and round-the-clock, a change from the government’s current system that is closed on weekends and can at times take days to settle a transaction.

“Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community,” Fed Gov. Lael Brainard said in prepared remarks for a speech at the Federal Reserve Bank of Kansas City Monday.

The Fed voted 4-1 to build the new network with Vice Chairman for Supervision Randal Quarles dissenting.

Big banks had waged a lobbying effort to stop the Fed from developing the new system. The banks, including

Citigroup
Inc.,

U.S. Bancorp and JPMorgan Chase & Co., have invested a total of about $1 billion in their own instant-payments system, launched in 2017 and operated by Clearing House Payments Co. They argued a competing Fed system would delay the spread of faster-payments, with some smaller banks likely to wait until the central bank launches its system. The Fed said it anticipates that the new service will be available in 2023 or 2024, and will support payments of up to $25,000.

Write to Lalita Clozel at lalita.clozel.@wsj.com

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