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August 5, 2022

On the web

With COVID Now in Year Two, Some Consumers Return to Cash Payments

San Francisco Fed

“In the last 12 months, American consumers have used slightly more cash for transactions than they did at this time last year. This rise in cash usage along with a small increase in purchases and peer-to-peer payments made in-person may imply that some consumers are moving back to the way they did business prior to COVID-19. The rise in cash payments is one key finding from a recent survey the Federal Reserve Banks of San Francisco and Atlanta conducted to better understand U.S. consumers’ payment behavior. Additional key findings from the Diary of Consumer Payment Choice highlight how consumer cash preferences have changed during the pandemic: In October 2021, the average number of cash payments increased from six to seven payments per month and accounted for 20 percent of all payments, up from 19 percent in 2020 and down from 26 percent in 2019. The share of in-person purchases and person-to-person payments increased to 82 percent, up from 80 percent in 2020 and down from 87 percent in 2019. The value of cash held in a consumer’s pocket, purse, or wallet averaged $67 in 2021, compared to $76 in 2020 and $60 in 2019. The value of cash held in a consumer’s home, car, or elsewhere remained elevated at $347, compared to $299 in 2020 and $241 in 2019.”

August 3, 2022

On the web

Americans Are Piling Up Credit Card Debt As They Struggle to Keep Up With The High Cost Of Living


“Americans are piling up credit card debt as they struggle to keep up with the high cost of living. US household debt surpassed $16 trillion for the first time ever during the second quarter, the New York Federal Reserve said Tuesday. Even as borrowing costs surge, the NY Fed said credit card balances increased by $46 billion last quarter. Over the past year, credit card debt has jumped by $100 billion, or 13%, the biggest percentage increase in more than 20 years. Credit cards typically charge high interest rates when balances aren’t fully paid off, making this an expensive form of debt.  The NY Fed said the credit card binge at least partly reflects inflation as prices rise at the fastest pace in more than four decades.”

July 28, 2022

On the web

Crypto Bank Custodia Sues Federal Reserve


“Custodia filed suit against the U.S. Federal Reserve on Tuesday, saying the central bank was unlawfully delaying a decision on the crypto bank’s application for a master account. In the filing in the United States District Court of Wyoming, Custodia accused the Federal Reserve Board of Governors and Federal Reserve Bank of Kansas City of delaying the application process by 19 months and called the master account “critical” to Custodia’s business.” Such an account would allow Custodia to directly access the Federal Reserve, rather than going through an intermediary bank,” Custodia said in the complaint. It also accuses the Fed of adopting “standardless” procedures that allowed it “to act in complete secrecy, whenever and however they choose.” The suit said the Fed’s own paperwork says that “a master account decision “ordinarily takes [five to seven] business days,” and that the processing delay had “clearly violated the [one]-year statutory deadline for doing so.”

July 22, 2022

On the web

UL Solutions and Iliad Solutions Collaborate to Offer Security Testing and Technology for Adopters of the FedNow[SM] Service

PR Newswire

“UL Solutions, a global leader in applied safety science, today announced its collaboration with Iliad Solutions, a company that helps test and launch payment solutions. The collaboration combines independent third-party services from UL Solutions with Iliad’s testing platform to offer optional support features for financial institutions and processors implementing the FedNow Service. Launching in 2023, the FedNow Service is a new instant payment system under development by the Federal Reserve… Iliad’s established testing platform has proven successful with top-tier providers of solutions to national real time payment schemes. UL Solutions currently delivers multiple large-scale secure virtual laboratories and hosted models for numerous central banks, government organizations, international and U.S. domestic payment brands, top-tier issuers and acquirers, payment service providers and ATM and point-of-sale (POS) terminal vendors. While the Iliad platform tests for ISO 20022, an international standard for exchanging electronic messages between financial institutions, and application programming interface (APIs), UL Solutions brings expertise in designing, operating and maintaining testing platforms and environments. Their combined offerings can help enable financial institutions and processors implementing the FedNow Service to securely launch and host.”

July 14, 2022

On the web

Powell: US CBDC Could Help Maintain International Role of Dollar

Dodd Frank Update

“In remarks delivered to a research conference hosted by the Federal Reserve Board, Fed Chair Jerome Powell discussed the international role of the U.S. dollar as well as the role a central bank digital currency (CBDC) might have in the future… The adoption of a U.S. CBDC, according to Powell, would improve on an already safe and efficient domestic payments system. “As the Fed’s white paper on this topic notes, a U.S. CBDC could also potentially help maintain the dollar’s international standing.” Powell emphasized the importance of considering not just what the global financial system needs now, but where it will be and what it will need in the next five to ten years.”

May 19, 2022

On the web

Federal Reserve Board Finalizes Rule That Governs Funds Transfers Over the Federal Reserve Banks’ FedNow Service

Board of Governors of the Federal Reserve System

“The Federal Reserve Board on Thursday finalized a rule that governs funds transfers over the Federal Reserve Banks’ FedNow℠ Service. The final rule is substantially similar to the proposal from last year, with a few clarifications in response to comments. The FedNow Service is a new 24x7x365 interbank settlement service with clearing functionality to support instant payments in the United States and is expected to be available in 2023. The final rule provides a comprehensive set of rules governing funds transfers over the FedNow Service and provides legal certainty and clarity on the rights and obligations of parties to a transfer over the FedNow Service.”

May 6, 2022

On the web

2022 Findings from the Diary of Consumer Payment Choice

Federal Reserve Bank of San Francisco

“The 2021 Diary of Consumer Payment Choice (Diary) finds that the COVID-19 pandemic has continued to affect the way U.S. consumers use and hold cash. The share of payments made in cash dropped sharply from 2019 to 2020 and then increased slightly in 2021, implying that cash use hit its lowest point in the first pandemic year. In contrast to cash use, consumers’ cash holdings remained elevated in 2021 when compared to 2019 and prior years, indicating that consumers continued to demand cash in the uncertain environment of the pandemic’s second year.”

May 2, 2022

On the web

FedNowSM Service Pilot Program Achieves Message Delivery Milestone, Welcomes New Participants

FRB Services

“The Federal Reserve has officially started onboarding pilot participants onto the FedNow Service, signaling that the initial testing phase of the FedNow Pilot Program is underway. A few organizations have now successfully connected and delivered test messages over a pilot version of the FedNow Service, marking a key milestone for the service, which remains on course to launch in 2023.  “The FedNow Service pilot participants, including financial institutions of all sizes, processors and correspondents, have been working hard at every step of this journey,” said Nick Stanescu, senior vice president and business executive of the FedNow Service. “Though much work remains, this progress sets the stage for thousands of financial institutions to be up and running with instant payments in the near future, including those that work with third-party payment providers.””

May 6, 2021

On the wires

Federal Reserve Board Invites Public Comment on Proposed Guidelines to Evaluate Requests for Accounts and Payment Services at Federal Reserve Banks

“The Federal Reserve Board on Wednesday invited public comment on proposed guidelines to evaluate requests for accounts and payment services at Federal Reserve Banks (“Account Access Guidelines”). Recent years have seen the introduction of new financial products and delivery mechanisms for traditional banking services, notably leveraging emerging technologies, including from institutions with novel types of banking charters designed to support such innovation. To facilitate these activities, some such institutions have requested access to the payments system offered by Federal Reserve Banks.”

July 21, 2020

On the wires

Federal Reserve Board to Maintain the Current Schedule of Prices for Most Payment Services That the Federal Reserve Banks Provide to Depository Institutions in 2021

“The Federal Reserve Board on Tuesday announced its intent to maintain the current schedule of prices for most payment services that the Federal Reserve Banks provide to depository institutions (priced services) in 2021. This approach recognizes the uncertainties created by the COVID-19 pandemic, and the difficulty in applying standard forecasting tools in this environment.”

July 7, 2020

On the web

Federal Reserve official warns US recovery may be ‘levelling off’

Financial Times (paywall)

“A senior Federal Reserve official has warned that the rebound in the world’s largest economy is in danger of stalling as a result of the recent spike in coronavirus infections across several large US southern and western states. In an interview with the Financial Times, Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, whose district covers some of the regions hardest hit by the current outbreaks, including Florida, said high-frequency data had shown a “levelling off” of economic activity both in terms of business openings and mobility.”

June 26, 2019

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