Bank Watch

Federal Reserve seeks faster digital payments in the U.S.

Venmo, which lets users pay with a tap, is among a variety of apps that allow people to send payments to one another in as little as one business day. The Federal Reserve is overseeing a task force examining ways to create a larger real-time payments system in the U.S. that would involve banks and other financial services companies.
Venmo, which lets users pay with a tap, is among a variety of apps that allow people to send payments to one another in as little as one business day. The Federal Reserve is overseeing a task force examining ways to create a larger real-time payments system in the U.S. that would involve banks and other financial services companies. AP

Imagine one day being able to use your smartphone to instantly reimburse the bank account of a friend who picked up your lunch tab – regardless of which banks the two of you use.

Today, the U.S. lacks a system that can allow such real-time electronic transfers of funds between accounts of customers no matter their bank. That leaves us lagging some other countries, such as the U.K., which launched its system back in 2008.

The U.S. is hoping to finally catch up. Earlier this month, I attended a talk in Charlotte presented by an official with the Federal Reserve, which last year created a task force so members of the financial services industry could figure out how to speed up payments.

“The U.S. is at risk of falling behind,” said Dan Gonzalez, who is based in Charlotte and serves as vice president of payment industry relations for the Fed. “Globally, there’s about 30 countries that have either implemented or are in the process of reviewing and potentially implementing a real-time, immediate-payment capability.”

The U.K. is now actually in the process of revamping its system, he said.

Gonzalez said the work of the task force is ongoing and it’s unclear exactly when the U.S. will see an expansive real-time payments system. Supporters of real-time payment capabilities in the U.S. see it as an improvement over the hodgepodge of options currently available to consumers and businesses.

For example, companies like Facebook and Venmo already offer services that allow people to send payments to each other with the tap of a finger. But those services are only open to people with a Facebook or Venmo account.

Users of such services sometimes have to wait at least one business day to have access to transferred funds, which doesn’t exactly fit the definition of “real-time.”

I don’t know about you, but I don’t want to have to open accounts with Venmo and whoever else just so I can send and receive payments with multiple people. And therein lies part of the problem the U.S. financial sector now finds itself facing.

“There are capabilities out there, but they’re typically done in what we refer to as closed-payment communities,” Gonzalez said. “It’s something that’s really happening within this (closed) community. And if you’re not part of that community, you can’t participate.”

Traditional banks have been paying close attention to such start-ups whose mobile-payments services are putting pressure on banks to improve their own offerings. Just this month, Bank of America announced the ability for its customers to instantly send and receive payments with U.S. Bank customers.

Which raises another issue: The Fed’s task force is designed to bring industry officials together to work on solutions. Many of these same companies may have competing interests, though.

“One of the big challenges is: How do you ... get them to talk to each other?” Gonzalez said.

Deon Roberts: 704-358-5248, @DeonERoberts

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