The Fed is standing in the way of 24/7 ACH payments

To the editor:

In your recent article, "UMB tech chief Uma Wilson weighs in on real-time payments," Ms. Wilson sagely notes, "there are no bank holidays for real-time payments." How this came to be, though, is based more on policy choices than inherent characteristics of a payment system such as the Federal Reserve's impending FedNow service.

Most American workers today get paid by direct deposit through the ACH network — 93% according to the most recent survey results of the American Payroll Association. Even though the ACH network operators are open to accepting ACH payment files 23¼ hours every banking day, the ACH network cannot settle these payroll payments on weekends and holidays because it is the Federal Reserve itself that is closed. We face the highly ironic situation in which, on one hand, the Fed is standing up a 24/7 system for instant payments, while on the other hand, the Fed is the impediment to 24/7 processing of ACH and other payments.

And it's not just payroll payments. Americans also pay bills and transfer funds at night and on weekends and holidays. All these use cases for consumer payments would be improved with availability on weekends and holidays.

Since at least 2013, when the Fed issued its consultation paper on Payment System Improvement, Nacha, which governs the ACH network, and many others have encouraged the Fed to expand the operating days and hours of its wholesale payment services, especially FedWire and the National Settlement Service. In its 2015 report, Strategies for Improving the U.S. Payment System, the Fed laid out steps to support weekend and/or 24/7 operating hours for the National Settlement Service. Now that FedNow will become a reality in 2023, it is time to expand the focus to other improvements to Federal Reserve services.