Fundamental changes in the way people spend money and the way banks process payments are forcing banks and the Federal Reserve Board to ensure convenience does not replace safety, a Fed governor said.
"There is often a basic trade-off between security and convenience — the easier a system is to use and access, the less secure it tends to be," Randall Kroszner said Thursday in prepared remarks for a speech at a Federal Reserve Bank of Chicago conference.
Regulators and the banking industry must monitor developing technology carefully for things that could disrupt the U.S. payment system, he said.
"Regulators must continue to evaluate and adjust their rules in light of new realities in the marketplace. At the same time, the private sector must put forward sound and prudent innovations that address the needs of the marketplace, including the need to control risk."
Historically, technology developments have played a major role in electronic access to money, Gov. Kroszner said.
"At times, there is a complex interplay between changing technology and regulation. In the payments arena, regulators and rulemakers need to be aware of how technology is changing the industry and, when appropriate, remove artificial barriers to innovation."
