Facilitating Consumer Payment Innovation through Changes in Clearing and Settlement

53 Pages Posted: 18 Aug 2014

See all articles by Bruce J. Summers

Bruce J. Summers

Consultant on Money, Banking, and Payments; Virginia Military Institute

Date Written: August 6, 2014

Abstract

This paper addresses concerns that the U.S. payment system is not keeping up with the rest of the digital economy in providing new methods of payment that give consumers immediate access to and use of their deposits held in accounts with banks and other deposit-taking institutions ("banks" for short). An international reference model is developed for an immediate funds transfer system that meets consumer needs in the digital economy. It is shown that despite a vision provided 35 years ago, and despite evidence of consumer demand dating back a decade or more, and notwithstanding successful commercial experience in a number of countries around the world, the U.S. payment system does not appear close to implementing immediate funds transfer capabilities. Governance issues appear to be the primary barrier to innovation in clearing and settlement that would support immediate completion of digital payments in the U.S. Four public policy recommendations are directed to the Federal Reserve, Treasury, and U.S. Congress that are action steps leading to upgraded payment services to consumers in the digital economy.

Keywords: digital banking, payment system, governance, public policy

JEL Classification: D10, D21, D41, D71, E40, G28, H41

Suggested Citation

Summers, Bruce J., Facilitating Consumer Payment Innovation through Changes in Clearing and Settlement (August 6, 2014). Available at SSRN: https://ssrn.com/abstract=2477162 or http://dx.doi.org/10.2139/ssrn.2477162

Bruce J. Summers (Contact Author)

Consultant on Money, Banking, and Payments ( email )

VA
United States
804-441-4456 (Phone)

Virginia Military Institute ( email )

Department of Economics and Business
Scott Shipp Hall
Lexington, VA 24450
United States

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