As it weighed whether to jump into building an electronic payments infrastructure, the Fed received strong encouragement from the community banking industry, which has held that a single, private-sector payments provider may not make nationwide inclusion a goal. The Fed’s real-time payments solution, announced in August, is FedNow, which gives the community banking industry what it has asked for, just not yet. FedNow isn’t expected to be completed until 2023, possibly 2024.
The alternative to FedNow, which is available now, is the RTP network, created by The Clearing House. RTP is touted as the real-time payments solution for all depository institutions, though some still fear community banks may get shut out.
One path toward community bank inclusion has been forged by Madison, Wis.-based Bankers’ Bank, which has become a funding agent for member banks looking for real-time payments capabilities. Giving clients “easy access onto TCH’s real-time rail” is good business, said Bankers’ Bank’s Matt Sitkowski.
More critical than quick access, noted Fed Governor Lael Brainard, is safety. “Stakeholders have noted the importance of having access to more than one real-time payments service for backup purposes in order to provide resiliency through redundancy,” Brainard said in August. “In fact, many banks already take advantage of having connections to multiple operators today in check, ACH and wire.”
As to why it will take until 2023 for the Fed’s payments infrastructure to become available, Brainard said, “For us, nationwide reach is really the concept that is in line with our public mission. And the question of ‘how long will it take?’ … is a quite different question.”
While timeliness was a consideration, the ultimate goal for the Fed is nationwide reach, Brainard said.