Esther George, president and CEO of the Federal Reserve Bank of Kansas City today announced that the FedNow payment system is now expected to be ready in 2023. In a conversation with American Bankers Association President and CEO Rob Nichols at ABA’s Annual Convention, George said the FedNow payment system will be delivered “sooner rather than later” and encouraged banks to start preparing for the rollout.
The Fed has about 120 participants in a FedNow pilot, George noted, all of whom have been informing the design features and helping the Fed think about the “some 10,000 connections” it will need to provide to get the industry ready. George said the Fed is looking at standards like the ISO 20022 message format to address interoperability and how multiple rails will work together.
She also addressed the potential role of central bank digital currencies in the U.S., telling Nichols that it’s “not clear to me right now what role a central bank digital currency would play in the United States—that’s because we see a well developed financial system here.”
Other countries pushing for CBDCs are facing other issues that the U.S. is not, George added, such as a drop in demand for physical currency or a lack of a developed and trusted financial system. “So, what is the case for the U.S. to be exploring this issue? I think the mere fact that you see other central banks moving in this direction requires the Federal Reserve to pay attention.”