Fed's Brainard lays out central bank's instant payment framework

FILE PHOTO: Federal Reserve Board Governor Lael Brainard speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., March 1, 2017. REUTERS/Brian Snyder

(Reuters) - Federal Reserve Governor Lael Brainard laid out the framework for the central bank’s instant payments system on Thursday, saying the Fed’s plans call for getting the system online as fast as possible.

Brainard said the launch of the payments system is still expected in 2023 or 2024, but the Fed is prioritizing developing key aspects of the program first to get it off the ground as soon as possible.

The coronavirus pandemic underlined how critical it is for people to access their funds quickly, as many households found themselves suddenly cash-strapped as businesses locked down in a matter of days. Brainard noted that many lower-income households sharply curtailed spending in the onset of the pandemic, and spending increased as soon as government emergency relief funds arrived.

“The ability to disburse funds via instant payments could have helped reduce the strain for those who needed the funds quickly in order to meet financial obligations,” she said in prepared remarks.

The Fed decided one year ago to launch its own instant payments system to compete with one already built by a group of larger banks. The late entry by the central bank has led to some grumbling among larger industry participants, who say the delay in a competing system is making it difficult to get instant payments off the ground more broadly.

Reporting by Dan Burns and Pete Schroeder; Editing by Chris Reese and Tom Brown