United States

Federal Reserve looks at future of US payments system


Innovations in the U.S. payment system have proceeded rapidly in recent years. Driven by new technologies and changing consumer demands, payment systems are evolving right before our eyes. Today’s methods of payments have changed decisively in the past two decades. Improving the speed and efficiency of the payment system is a key concern, as is providing safe and secure systems in the context of ongoing security threats. 

Recognizing these trends, the Federal Reserve System is seeking to develop a broad strategic vision of the future of the U.S. payments system.  In September 2013, it released a paper on the topic. The paper lays out the Federal Reserve’s perspectives on the issue, including identifying deficiencies and opportunities in the current U.S. payment system, as well as ways the central bank can address these problems.

Current innovations in payment processing systems would have been unimaginable 20 years ago. Payment systems are becoming more complex, comprised of incumbents, such as banks and processors, new entrants, such as nonbank innovators and end users -- individuals, corporations and governments. In such a dynamic and complex environment, ongoing innovation is necessary to ensure safe and efficient payments that support economic activity.

The current vision focuses on the end user, whereas past Federal Reserve Bank payment strategies focused on interbank issues. This expanded vision seeks to ensure that payment system improvements meet the needs of end users who are the ultimate beneficiaries of the payment system; thus, their needs should drive improvements. End users have access to powerful communications technologies. This is changing not only how they want to make payments, but also how they manage their finances.

The Federal Reserve has also announced its interest in working with industry leaders to develop a strategic vision for the future of payments. The Federal Reserve believes that any meaningful change should be the result of mutual collaboration between the government and industry. Comments to the September paper were accepted through Dec. 13, and those comments are currently being reviewed.  The payment system improvement paper can be found here: http://fedpaymentsimprovement.org/wp-content/uploads/2013/09/Payment_System_Improvement-Public_Consultation_Paper.pdf