The Fed’s announcement that they are exploring real-time gross settlement 24/7/365 has sent shockwaves through the industry. And, it has a lot of us placing bets on what may come next. Reports have already emerged questioning whether this latest request-for-comment (RFC) is an indicator that the Fed may be contemplating becoming an operator for a real-time payments (RTP) system.
But nowhere in this proposal does it indicate that level of specificity. And, true to their nature, the Fed is continuing to engage the industry while holding their cards close to the vest, indicating that while they are seeking public comment on real-time gross settlement, they are, “not committing to any specific actions at this time or in the future.” With a disclaimer like that, I wouldn’t count on major action any time soon.
Don’t get me wrong: This is huge news that can go a long way to advance faster payments in the U.S. Real-time gross settlement supports financial institutions in moving into a less risky, faster environment. If the Fed were to offer it for a real-time system, this move could pave the way for those financial institutions considering RTP to take their chances and jump on board. It could increase bank and credit union support for a real-time payments infrastructure.
That’s why I think this RFC shows that the Fed is continuing to act in the role it envisions for itself: catalyst of change. It’s working through its processes to spark discussion, momentum and engagement from all facets of the industry. It’s stirring the proverbial pot to get us all focused again on what’s at stake. It’s looking to the market to lead the change, offering encouragement and support all along the way.
To get specific, the RFC is looking for feedback on two key items:
1. The development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year (24x7x365).
2. The creation of a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.
It goes on to note that the Fed is “seeking input on which, if any, actions the Federal Reserve should take.”
While the request is on a specific topic, that last ask becomes a whole lot more open-ended. So, what do we think? What actions should the Federal Reserve take?
They are calling on us to respond. We should not be sitting back to ponder what the Fed’s strategy may be; instead, we need to be focusing in on ours. They are asking for our input. Where is the market meeting expectations for real-time payments? Where it is falling short? How will what the Fed’s proposing address—or not address—these issues? What actions do we want them to take?
NEACH will be considering all of these questions as we pull together a response to file before December 14. With input and guidance from our membership and Board, we will be leveraging this opportunity to offer needed feedback to get us to the reality of ubiquitous real-time payments.
As I see it, we’re past the time of “wait and see.” This is our moment to get it right. We need to evaluate our internal strategies and assess how they line up against a real-time payments infrastructure. We need to ask ourselves, what role do we need the Fed to play to make RTP a success for all FIs?