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1 1 (July 24, 2019)

handle is hein.crs/govbann0001 and id is 1 raw text is: Congressional * Research Service Real Time Payments Initiatives July 24, 2019 Technological advances have made it feasible to create a real time payments (RTP) network between financial institutions in which the recipient of an electronic payment would receive funds in seconds, compared to the current practice of later in the day or the next day. RTPs could potentially be introduced by the Federal Reserve (Fed), private-sector competitors, or both. What role, if any, the Fed should play in RTP development is a matter of debate. Background This Insight discusses payment and settlement systems that allow individuals and businesses to complete payments across different financial institutions and platforms. To simplify, a payment has three parts. First, the payer initiates the payment through an end-user service, such as an online payment service or mobile app, instructing a bank to make a payment to the recipient. (The payer and recipient only interact with end-user services.) Second, the payer's bank sends a payment message involving the payment details to the recipient's bank through a payment system. Finally, the payment is completed when the two banks transfer funds through a settlement system. These parts could potentially be divided between different systems, and different providers could potentially compete with each other to provide each part. The Fed operates its own payment and settlement systems that connect banks and selected other financial institutions with Federal Reserve accounts. It also regulates competing systems that are privately operated. For example, the Fed and the private-sector Electronic Payments Network (owned by The Clearing House) operate competing automated clearinghouse (ACH) systems, which are payment systems that allow banks (and certain other financial institutions) to send direct debit and credit messages that initiate funds transfers. The Fed also operates Fedwire Funds Service, a wholesale settlement system that allows banks to accumulate and net multiple transfer requests and transfer funds in bulk to each other, and offers the National Settlement Service to facilitate multilateral settlement between financial institutions with Federal Reserve accounts. The Clearing House Interbank Payment System (CHIPS) is a competing private-sector gross settlement system. (The Fed does not operate any end-user service directly accessed by individuals or nonfinancial businesses.) Several private-sector initiatives are underway to implement faster payments. Notably, the Clearing House introduced its RTP network in November 2017; according to the Clearing House, it currently reaches 50% of U.S. transaction accounts, and is on path to reach nearly all U.S. accounts in the next several years. Other countries have already introduced or are in the process of introducing RTP. Congressional Research Service https://crsreports.congress.gov IN11147 CRS INSIGHT Prepared for Members and Committees of Congress

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