U.S. Fed planning real time payments system akin to India’s UPI by 2024

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U.S. Fed planning real time payments system akin to India’s UPI by 2024:

The U.S. Federal Reserve seems to have taken inspiration from India’s UPI (Unified Payment Interface), an instant real-time payment system that was launched way back in 2016 to boost payment infrastructure in the country.

Regulated by the Reserve Bank of India, UPI was developed by National Payments Corporation of India (NPCI) to allow sending or requesting money through a mobile number or a virtual payment address (VPA) among other means.

Announcing a similar mode of payment, the U.S. Federal Reserve on Monday said that it plans to develop its own round-the-clock real-time payments and settlement service. However, the service is expected to launch in 2023 or 2024.

According to a news report by Reuters, the payment service will be known as FedNow and it would compete with The Clearing House, a consortium of large banks launched in 2017, to provide real-time payments system. But the operating system, at present, takes several days to clear the payments and is not very effective.

“Immediate access to funds could be especially important for households on fixed incomes or living paycheck to paycheck, when waiting days for the funds to be available to pay a bill can mean overdraft fees or late fees,” Fed Governor Lael Brainard said in a speech while announcing the features of FedNow.

The report further added that the American central bank had sought public comments, 90 days from now on how the FedNow should be built. The service, a near-instantaneous transfer of funds 24 hours a day, could yield economic benefits for individuals and businesses, as per the report. The transaction size has been capped at $25,000 for all the businesses with Fed accounts. The move has been hailed by several small and large corporate houses in that country.

The Fed has studied real-time payments for several years, establishing a task force in 2015. It had solicited public comment on building its own real-time payments system.

Experts are of the view that FedNow will also help in bringing down the cost of online payments in the US. As per the website of The Clearing House, the network fees for a credit transfer is around USD 0.045.