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1 1 (August 8, 2019)

handle is hein.crs/govbasa0001 and id is 1 raw text is: *ACongressional A Research Service Informing the legislative debate since 1914 Real Time Payments Initiatives Updated August 8, 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. The Federal Reserve's (Fed's) recent announcement that it would create a RTP system has been controversial, as it will be directly competing with a privately owned system. 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 apayment 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 be divided between different systems, and different providers could compete with each other to provide each part. RTP initiatives involve speeding up each step of the payment process. The Fed has long operated its own payment and settlement systems connecting banks and selected other financial institutions through their Federal Reserve accounts. It also regulates competing systems that are privately operated. (The Fed does not operate any end-user service directly accessed by individuals or nonfinancial businesses.) On August 5, 2019, the Fed announced plans to introduce FedNow, a new interbank 24x7x365 real-time gross settlement service with integrated clearing functionality to support faster payments in the United States, in 2023 or 2024, with nationwide reach taking longer to achieve. FedNow will provide the payment message and settlement steps of a payment described above. It will be available to all banks with a reserve account at the Fed, and banks will be required to make those funds available to their customers immediately after the bank is notified of settlement. In the August notice, the Fed stated it was also exploring expanding its existing settlement services to permit 24x7x365 real-time gross settlement to accommodate the need in real-time settlement for banks to Congressional Research Service https://crsreports.congress.gov IN11147 CRS INSIGHT Prepared for Members and Committees of Congress

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