{
  "id": "R45927",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R45927",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 605532,
      "date": "2019-09-23",
      "retrieved": "2019-10-10T22:27:27.120386",
      "title": "U.S. Payment System Policy Issues: Faster Payments and Innovation",
      "summary": "Technological advances in digitization and data processing and storage have greatly increased the availability and convenience of electronic payments. New products and services offer faster, more convenient payment for individuals and businesses, and the numerous options on offer foster competition and innovation among end-user service providers. Currently, many new payment services are layered on top of existing electronic payment systems, which may limit their speed. \nMost payments flow through both retail and wholesale payment systems before they are completed. Consumers access retail payment systems to purchase goods and services, pay bills, obtain cash through withdrawals and advances, and make person-to-person transfers. Consumers\u2019 financial institutions access wholesale systems to complete the payment. In the United States, systems accessed by consumers are operated by the private sector, whereas systems accessed by banks to complete those transactions are operated by the Federal Reserve (Fed) or the private sector. \nRegulation of retail payment systems is dispersed across multiple state and federal regulators. For example, payment systems are subject to federal consumer protection regulation under the Electronic Fund Transfer Act (P.L. 95-630), anti-money laundering requirements under the Bank Secrecy Act (P.L. 91-508), and various state licensing, safety and soundness, anti-money laundering, and consumer protection requirements. Private wholesale payment systems are regulated by the Fed, and if they are systemically important, they can be designated as \u201cfinancial market utilities\u201d and subject to heightened oversight. Although faster and potentially less costly payment systems may benefit consumers and businesses, the use of new technology in existing and new payment systems raise a number of questions for policymakers. Some observers have argued that certain innovative financial technology, or fintech, payment companies would be more effectively regulated through the federal banking regulatory framework, whereas opponents of this idea assert it would result in the preemption of important state-level consumer protections and in an inappropriate combination of banking and commercial activities. The increased prevalence of data generation, collection, and analysis in payment systems has caused observers to question whether existing regulation adequately addresses issues related to data privacy and cybersecurity. Although the traditional high-levels of industry concentration and the recent entry by technology giants have raised concerns over market power and industry competition, competition to date has been robust and certain analysts argue that internet-based payments that do not require a large investment in infrastructure will prevent the market concentration that exists in older payment services. What effect technological innovation in payments will have on consumer access and whether consumers are adequately protected against potential problems, such as fraudulent or erroneous transactions, are also subjects of debate. \nIn August 2019, the Fed announced plans to create an interbank real-time payments (RTP) system by 2023 or 2024. The Fed stated that the new system will be available to all banks with a reserve account at the Fed, and it will require banks using this new system to make those funds available to their customers immediately after being notified of settlement. In addition, several private-sector initiatives are also underway to implement faster payments, some of which would make funds available to the recipient in real time (with deferred settlement) and some of which would provide real-time settlement. Businesses and consumers would benefit from the ability to receive funds more quickly, particularly as a greater share of payments are made online or using mobile technology. The main policy issue regarding the Federal Reserve and RTP is whether Fed entry in this market is desirable, given similar private-sector developments are already underway. There is debate about whether competition from the Fed would be beneficial in terms of cost, efficiency, safety, innovation, ubiquity, and financial stability. In the 116th Congress, H.R. 3951 and S. 2243, among other bills, would require the Fed to create a RTP system and would require banks to make payments to account holders in real time.",
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      "typeId": "REPORTS",
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      "topics": [
        {
          "source": "IBCList",
          "id": 4870,
          "name": "Banking"
        },
        {
          "source": "IBCList",
          "id": 4891,
          "name": "Federal Reserve & Monetary Policy"
        }
      ]
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  ],
  "topics": [
    "Economic Policy"
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}