The Federal Reserve and faster payments: ‘Umbrella’ or ‘rails’?

This paper analyses the responses to the US Federal Reserve’s public consultation on faster payments. It uses an inductive approach to identify emergent issues and stakeholder alignment around two issues: the role of the Federal Reserve in a new payments system and the design of a new payments system. There is little support for a publicly provided faster payments system and the ‘operator’ role of the Federal Reserve is likely to decline with the transition to electronic payments. The private sector views faster payments as a new channel rather than network infrastructure and is hesitant to invest in a new system without a business case. Americans will have to wait until 2018 for same-day payments via their bank accounts and much longer for near real-time payments, meaning the USA will, in this regard, fall further behind many developing and developed countries. Innovation will be limited to the consumer-facing interface and more closedloop networks will emerge in the short term. The coordination failure also leaves more room for firms seeking to disrupt the payment rails.