Fed names leader for development of real-time payment system

Kenneth Montgomery, a longtime executive at the Federal Reserve, will lead the central bank’s development of its newly planned real-time payment system.

Montgomery’s appointment, announced Thursday, is the first in a series of important decisions that the Fed will need to make as it builds the next-generation service.

“Ken brings deep financial services insights and technical expertise to his new role,” Esther George, the president of the Federal Reserve Bank of Kansas City, said in a press release.

Montgomery currently serves as first vice president and chief operating officer at the Federal Reserve Bank of Boston. He will remain in that role while also heading the development of the FedNow service.

Montgomery has also served recently as the leader of the Federal Reserve System’s strategy on payments security — a key issue in the development of a real-time system.

The Fed announced its plan to build and operate the speedier payment system on Aug. 5. The decision was generally welcomed by small banks. But it displeased big banks that have collectively built their own real-time payment system and wanted the Fed to defer to the private sector.

The Fed has said that it expects its new service to be available in 2023 or 2024, and that achieving nationwide reach is likely to take longer. That timeline has been widely panned as too slow, and the central bank is likely to face strong pressure to move more quickly. But the process is likely to be slowed by rules that require the central bank to seek public comment along the way.

The Fed is currently seeking comment on how FedNow might be designed. Over the next few months, the central bank is also expected to hold meetings with a variety of private-sector firms, including banks, credit unions and technology providers to the banking industry.

Additional details about the architecture of the FedNow service are expected to be announced in 2020.