The Federal Reserve implements new strategies to improve the U.S. payment systems

With the evolution of technology, the mobile payment market is rapidly expanding, making payment processes more sophisticated and easy. In its recently published paper, Strategies for Improving the U.S. Payment System, the Federal Reserve has decided to implement a series of strategies to render the U.S payment system safe, efficient and broadly accessible.

Involved in Building a Strategic Vision for the Future of Mobile Payments

Founded in 1913, the Federal Reserve is the central bank of the United States. Having “acquired massive powers over the nation’s financial system”, it was created by the Congress to offer a “safer, more flexible, and more stable monetary and financial system” to the U.S economy and the population. As a leader in this industry, the Federal Reserve strives to ensure price stability, maximum employment, promote consumer protection and to act as primary regulators of risk in the banking sector.

The U.S Payment System Has Reached a “Critical Juncture”

After realizing that the U.S payment system has reached “a critical juncture”, the Federal Reserve plans to focus more on securing mobile payment processes and making them more convenient to address consumer demands. Over the last few years, cybercriminals across the globe have found inventive ways of invading the payments system. Today, over 160 members are working together in the Secure Payments Task Force of the Federal Reserve to make the payment system faster, more efficient and secure.

Technology Is Changing the Nature of Payment Processing Systems

At a New York conference, Jerome Powell, the board governor of the Federal Reserve said, “Rapidly changing technology is providing a historic opportunity to transform our daily lives, including the way we pay.” Technology is changing the nature of payment processing systems and the expectations of consumers as well. With so many U.S citizens and businesses transferring money through mobile payment mediums, it has become incumbent to ensure the protection of sensitive data. Powell further adds that “it is essential, however, that this innovation [does] not come at the cost of a safe and secure payment system that retains the confidence of its end users.”

Five Desired Outcomes Were Proposed

Esther George, the president and CEO of the Federal Reserve Bank of Kansas City who has also sponsored the payments improvement initiative is of opinion that the “2015 paper laid out ambitious goals for the U.S. payment system that will require the sustained commitment of the Federal Reserve and the industry to achieve. Thanks to the collective efforts of hundreds of payment system stakeholders during the past two years we’ve made real progress. Through the strategies and tactics outlined in this next steps plan the Federal Reserve will support continued industry momentum toward safe ubiquitous faster payments for our country.”

In a previously published paper in 2013, the Federal Reserve proposed five desired outcomes that could be achieved only through collective efforts by all contributors. These included:


“A ubiquitous, safe, faster electronic solution(s) for making a broad variety of business and personal payments supported by a flexible and cost-effective means for payment clearing and settlement groups to settle their positions rapidly and with finality.”

The Federal Reserve strongly believes that developing convenient ways to help consumers and businesses make real-time payments would maintain the global competitiveness of the U.S payment system. An end-user research sponsored by the Federal Reserve shows that speedy payment processes are important for businesses and consumers as well. It would benefit “at least 29 billion transactions per year, which is 12 percent of the total for the country”.


Payment processes are becoming electronically accessible which is, in turn, increasing threats to confidentiality and security. Handling cases of data breaches, fraudulent ATM withdrawals, computer malware, payment card skimming or phishing attacks are not only costly but time-consuming as well. The Federal Reserve has sponsored a Payment Security Landscape Study to investigate certain security features that would be better suited for end-users to compensate for the shortcomings in the security systems.


The Federal Reserve notes that reducing the end-to-end costs of payment transactions by facilitating and innovating payment services is a must. The use of paper checks has decreased over the years and the latest Fed Payments Study shows that over 85 percent of general payments were done electronically in 2012. Enhancing electronic alternatives would “accelerate the transition” and improve the value of the service provided to businesses and individual consumers.

International Payments

“Better choices for U.S. consumers and businesses to send and receive convenient, cost-effective and timely cross-border payments.”

Globalization has created a need for fast, accessible and highly efficient cross-border payments. Some feedbacks from the respondents suggested the adoption of global standards (for example ISO 20022) and the “direct linking of U.S payment systems with those located abroad”. The Federal Reserve highlights the importance of this desired outcome and has started to investigate and discuss various strategies and tactics related to it.


The U.S payment system involves millions of businesses and individuals, thousands of financial institutions and non-bank payment services providers that include innovative entrants which makes coordination challenging and complex. The Federal Reserve emphasizes the need to have a collaborative and collective approach to improve the payment system which will considerably “increase the probability of successful outcomes”.

The Federal Reserve has also implemented a series of strategies that could make the payment system easier and more convenient to suit consumers’ demands, which requires collectively identifying and accepting a “broad array of payment participants, with material progress in implementing them”.

Related articles published in Mobile payment :

Image: Shutterstock