In 2019, it's still the case in America that if you deposit a check or have funds wired into your bank account, it can take up to five days for you to access your money. This puts the United States behind such advanced economies as India, Poland, and Kenya, the latter of which has had real-time payments through mobile phones for some time. In fact the Federal Reserve does offer real-time payments, but only to commercial bank accounts, not individual ones.
This hampers poor and vulnerable families operating without a safety net who need access to their money as soon as they get it, leading to billions in overdraft fees. It has also given space to big banks and tech companies to enter this space, potentially charging customers for something that the government is eminently capable of providing. The Clearing House, a coalition of 24 major banks, has developed its own (for-profit) real-time payment system. Fintech firms like Venmo have also jumped into the void, along with Facebook, whose Libra digital currency is touting real-time payment services.
As Representative Ayanna Pressley expressed to Fed Chair Jerome Powell last month, the central bank's foot-dragging on real-time payments has created this frenzy. The Fed has spent years studying real-time payments but mostly deferred to the private sector. After that hearing, rumors that the Fed would announce a real-time payment system set the big banks' hair on fire, even though the Clearing House system is not yet operational.
Now some progressive politicians are getting involved. Today, Pressley, along with Chuy Garcia in the House and Elizabeth Warren and Chris Van Hollen in the Senate, announced the Payments Modernization Act, a short bill that would require the Fed to create a real-time payment system. This sounds like a small matter but would be a life-saver for low-income families who need their money immediately. The Fed's delay in implementation is ridiculous, which has allowed large corporations to potentially profit off what should be a public good. Congress weighing in will put pressure on the Fed to finally act in the public interest. The technology is there; Pressley and her colleagues are finally supplying the will.