The United States has long been a leader in financial innovation, from the rise of the internet to the introduction of credit cards and ATMs. However, despite being home to numerous fintech companies, the U.S. lags behind other major economies in providing 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 adoption of digital payment technology.
Traditional banks are currently the only ones with access to U.S. payment rails like FedNow, forcing leading payment companies to rely on banks as intermediaries and pay high fees. This results in higher costs and slower speeds for consumers and businesses when making transactions. The U.S. can unlock faster payments by allowing well-regulated payment companies to directly participate in the national payments system, modernizing our payment rails and providing instant, affordable payments to American consumers and businesses.
According to recent developments, the U.S. needs to catch up to the global standard for payment regulation, as 60 nations have already adopted faster payments systems. The European Union recently announced its Instant Payments Regulation, expanding access to instant payments systems beyond banks to payment companies. Similar advances are being made in other countries like Canada, which is set to launch a real-time payments network that will open up access to registered payment companies, benefiting consumers and businesses significantly.
The launch of FedNow, the first public real-time payments infrastructure in the U.S., is a step in the right direction, but it is limited to traditional financial institutions. As nearly nine in ten Americans use fintech apps, it is time to expand FedNow’s access to include non-bank payment companies and provide direct access to the federal payments system. This modernization will create a safer, more secure, and trusted payments system, benefiting consumers and businesses by driving down costs, reducing payment failures, minimizing fraud, and enabling the use of next-generation digital tools.
Expanding access to instant, affordable payments in the U.S. will have numerous benefits, including spurring financial inclusion, helping businesses settle expenses in real time, minimizing fraud, and empowering government agencies to disburse benefits quickly and accurately. Giving American consumers and businesses access to instant payments is crucial for the U.S. to remain competitive on the global stage and reflect the innovation in financial services today. Penny Lee, President and CEO of the Financial Technology Association, emphasizes the importance of modernizing the U.S. national payments system to unlock these benefits.
