There’s been more than a little debate about plans by the Clearinghouse and the Federal Reserve to set up their own ‘real time payments’ system, with the goal, at least in part, of bolstering financial inclusion.  On the one hand, you have folks pushing for a purely private model, and on the other, advocates urging for a public utility model.

My view on these things is that I can’t see why the two approaches can’t coexist. Indeed, competition may be quite beneficial. Historically, the Fed system has not exactly been responsive to the demand (or need) for reform.  Meanwhile, I’m not convinced that a conglomerate of big banks will be seeking the lowest-cost fares and fees for small banks or their customers. Instead, they may well be incentivized to either raise prices like any other oligopoly or grow their businesses that protect native business lines. Having healthy private-public competition play out, between two institutions that have the scale to really drive down costs for everyday people, seems like a good outcome for everyone.

Still, it’s entirely possible that there may be more than a little hyperbole on both sides as well. For all of the benefits of a payments system, the real financial services problem hampering financial inclusion is that not enough people have deposit accounts — or regular sources of income to support no-fee, deposit-account minimums. So swifter payments might assist the underbanked — those who already have access to basic banking services, though not an optimal suite of services — but it may do little to help the unbanked. Finding the right policy for this especially vulnerable subset of people, which account for about 8 percent of the U.S. population, will require not just technological innovation, but also a clear-eyed pragmatism about how a broader array of reforms will be required to open the doors of financial access more fairly.


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