Target and Walmart, among other companies, are asking the Fed to create a way for interbank transfers to be settled in real time, 24/7, in an effort to get paid in real time. The system may eventually shorten the lag time between when a shopper pays with a debit card to when the funds arrive at the retailer, The Wall Street Journal reported.
The Fed had discussed actions that could aid in the creation of a faster payment system, such as the development of a real-time settlement service. Target and Walmart, as well as trade groups like the National Retail Federation, have reportedly long talked to the Fed about faster payments. Fed actions could potentially enable shoppers to make payments from their checking accounts without going through the rails for debit cards.
But such a payments system would face some challenges. For one, consumers like credit cards that offer rewards. As a result, it might not be easy to make them change to other payment methods. And payment terminals might need to be revamped in order to work with such a new system. (Retailers have already made changes to them to allow for the acceptance of chip-based cards.)
The news comes as Federal Reserve Governor Lael Brainard said in early October that the Fed's infrastructure underpinning payments could use some modernization in an effort to support fast payments “for all.” As a result, the Fed was seeking comments from the public on what she said could be “potential steps” that they could take “to support the vision of RTGS [real-time gross settlement] of faster payments.”
Brainard, speaking at the FedPayments Improvement Community Forum in Chicago, said in her remarks that while “we are seeing a growing demand for payments to be as instantaneous as the apps on our smartphones,” the reality is a bit different: Payments rely on what she termed a “patchwork” of systems that, operating behind the scenes, can result in delays and inefficiencies, and where access can be uneven as well.