Lael Brainard: The future of retail payments in the United States

Speech (via webcast) by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at the FedNow Service Webinar, Washington DC, 6 August 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
07 August 2020

It is a pleasure to be here today with Esther George and Ken Montgomery to talk about the future of America's retail payment system. Recognizing that the retail payment infrastructure touches every American, a year ago, the Federal Reserve committed to build its first major new payment system in four decades. At that time, no one anticipated the challenges our nation would soon face. The COVID-19 pandemic has heightened the urgency and importance of delivering a resilient instant payment system that is accessible to all Americans. 1

The COVID-19 pandemic is taking a tremendous toll on communities across America, especially households and small businesses with the least liquid resources to weather the storm.2 Emergency relief payments authorized in the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, provided a vital lifeline for many households.3 The rapid expenditure of the COVID emergency relief payments highlights the critical urgency of immediate access to funds for the many households and businesses managing cash-flow constraints. After sharply reducing their spending early in the COVID crisis, many households increased their spending starting on the day they received the emergency relief payments and continued for the following 10 days.4 The rapid increase in spending was greatest for households with lower incomes, greater income declines, and lower liquid savings.5