The U.S. has long been a hub of financial innovation, with major advancements like the internet, credit cards, and ATMs originating there. However, despite being home to numerous financial technology companies, the country is falling behind in one crucial area: universal access to real-time payments. While 82% of Americans now use digital payments, the legacy payments system in the U.S. does not reflect the rise of digital payment technology, leading to higher costs and slower speeds for consumers and businesses.
In order to catch up to the global standard for real-time payments, the U.S. must enable the direct participation of well-regulated payment companies in its payment rails. Currently, traditional banks are the only ones with access to U.S. payment rails like FedNow, forcing payment companies to rely on banks as intermediaries and pay a hefty toll in the process. By modernizing the national payments system and expanding access to real-time payments, American consumers and businesses can benefit from instant, affordable payments on par with their peers in other countries.
Despite 60 nations adopting faster payments systems, the U.S. has yet to make plans to expand access to its payments system, making it the only G7 nation without such plans. Other countries, such as the European Union, the United Kingdom, Japan, Canada, Singapore, Australia, India, and Brazil, have already expanded access to instant payments systems beyond banks to payment companies. These advances have resulted in significant time and cost savings for consumers and businesses, which should also be made available in the U.S.
The launch of FedNow, the first public real-time payments infrastructure in the U.S., is a significant start, but it is limited to traditional financial institutions. With the increasing use of fintech apps by Americans, there is a need to expand FedNow’s access to include non-bank payment companies. This expansion would lead to benefits such as driving down prices for money transfers, settling expenses in real time, reducing fraud, and enabling the use of next-generation digital tools like identity verification and authentication measures.
Expanding access to real-time payments in the U.S. will not only benefit consumers and businesses but also spur financial inclusion, reduce payment failures, minimize fraud, and empower government agencies to disburse benefits quickly and accurately. By creating a more safe, secure, and trusted payments system, the U.S. can ensure it remains competitive on the global stage in terms of financial innovation. Penny Lee, the President and Chief Executive Officer of the Financial Technology Association, emphasizes the importance of modernizing the U.S. national payments system to unlock the full potential of instant, affordable payments for American consumers and businesses.
