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Industry players welcome FedNow faster payments plan

Industry players welcome FedNow faster payments plan

The American Bankers Association and credit union groups are among those offering their support for the Federal Reserve Board's plans to build a new round-the-clock real-time payment and settlement service.

For over five years, the Fed has been inching the US along a journey towards a payments system fit for the 21st century. After much deliberation, earlier this year it decided to build its own interbank 24x7x365 real-time gross settlement service with integrated clearing functionality, dubbed FedNow.

Several industry players responded to a request for comment on the plans, with most offering broad support.

The American Bankers Association (ABA) says that FedNow "can contribute to a better, faster and safer payment system if implemented correctly".

However, the group cautions that it must be interoperable with other systems, notably the Clearing Houses's RTP network, which is backed by some of the nation's biggest banks and had lobbied the Fed to be designated as the US' national real-time network.

Says the ABA letter: "A faster payments ecosystem that does not provide interoperability between systems with similar levels of service and security will fragment the market. It will also result in excessive costs and inefficiencies for banks, increase costs, and produce inferior customer experiences."

The National Association of Federally-Insured Credit Unions (NAFCU) also welcomes FedNow and puts its weight behind interoperability. The organisation also calls on the Fed to "expedite delivery and seek to launch at the earliest possible date". Currently, FedNow is set to go live in 2023 or 2024.

Meanwhile, Federal Trade Commission commissioner Rohit Chopra also calls for a speedy implementation, raising the spectre of private rivals such as the Facebook-led Libra project.

“As large private firms on Wall Street and Silicon Valley seek to leverage their market power through control of critical infrastructure, it is more important than ever for the Board to implement this proposal quickly," he writes.

Chopra adds that, regardless of Libra's fate, its "emergence underscores the appetite for real-time payments and the urgency of intervention by Federal Reserve".

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