The Federal Reserve is "strongly considering" going ahead with the launch of a new payment system that would go head-to-head with a similar network run by Wall Street's biggest banks, according to a report by Politico.
Fed Chairman Jerome Powell sent a letter to lawmakers defending the idea of an upgraded network, which would aim to support instant transactions for individuals and businesses. Currently, the Fed operates a payments network that sits alongside the networks run by banks and credit card companies, but it is underpinned by outdated technology and does not support instant, 24-7 transactions.
"We’ve not made a decision on this, but it’s something we’re looking at carefully, and it’s something I do expect we’ll make a decision on soon," Powell said at a press conference Wednesday.
As noted by The Wall Street Journal, a new Fed-run network would rival a network launched in 2017 by financial giants including Citigroup and JPMorgan. Banks say the initiative could delay some institutions from adopting real-time payments because they might wait for the central bank to launch its new network, rather than link up to existing private options. They are also concerned that the Fed could undercut them on pricing.
Still, The Fed counts a number of lawmakers on its side, including Senator Chris Van Hollen of Maryland and U.S. presidential hopeful Elizabeth Warren of Massachusetts.
"The costs of the slow payments system are borne by American consumers, especially those who have to live paycheck-to-paycheck,” said Sen. Van Hollen. “It’s a mistake to entrust this system to the biggest banks."