Participation in the Federal Reserve’s real-time payment settlement service, FedNow, has expanded from an initial group of 50 banks and credit unions to more than 100, Fed Gov. Christopher Waller said Friday at a payments conference held by the Brookings Institution.
Since FedNow’s launch in July, the sign-ups have been growing, while internal projections indicate the number could rise to approximately 350 by year-end, Waller added. Uptake of the long-awaited payments settlement service remains robust, he said when asked about the lower-than-expected adoption among banks.
“We have got more in the pipeline and there are various estimates that could range from 250 to 350 by the end of the year, and they just continue to grow as banks do it,” Waller said. “But the banks have to see some value proposition and to make the investment to join and want to do it. And that depends on what the customers want.”
When FedNow was launched in July, it was intended to be a minimum viable product that would have enough features to allow early users to give feedback.
“Let’s get the thing out, make sure it works, see how people use it. And then from there, you build it out in terms of the network and capabilities that you give to people on that,” he said.
Waller also echoed his stance on central bank digital currencies, saying he believed the technology holds little benefit for the Fed, banks and consumers in today’s payments landscape.
“The basic question I asked is what a typical economist would ask, which is: ‘What is the major market failure in the payment system that requires a CBDC and only a CBDC to solve?” he said. “I posed that question two years ago and I have not heard one satisfactory answer to that question yet. It makes me think that a CBDC is something you could do but there’s nothing that makes you need it.”
Waller argued that although the current system works well since people are content with bank accounts enabling broad access, the Fed wants to explore CBDCs in preparation for a potential congressional mandate. The Fed wants to research the technology, record-keeping and management of how CBDCs work so that they are ready if legally required.
“We always have to be prepared for the fact that if Congress were to, in fact, tell us: ‘Do this,’ that we would have the technology and know-how to do it,” he said.