Businesses. Here we are. Thank you. Good morning, everyone. It is a pleasure to welcome you all on behalf of the brookings institution. Cornell law school and vanderbilt law school. We are incredibly delighted that you have joined us today in person as well as online. Talk with u. S. Financial system, given that it is outside of a Holiday Weekend and you guys are here to talk about the Payment System, i think it is safe to assume you are here for a completely full on nerd experience so that is exactly what we are here for. Deeply desperately needs it. It needs your ideas, it needs your policies and passion to get it ready and equipped but we know is already here so we know the u. S. Payment t system has undergone structural transformation over the last three or four years and if we could have a show of hands in the room, youve been using the last 24 hours to pay for anything. One, two, three, four. You think as much as so many of us are moving toward a cashless universe especially after the pandemic, communities across america, communities of color, lower income households left behind, under banking and the Payment System, it not working as inclusively as we need to. It is seemingly instantly. Money often takes several days to hit our bank account and be ready for us to actually use. As much as the u. S. Uncontested of the issuer globally, international u. S. System remains unwieldy and expensive and globally less and less competitiver as we enter this century. This is becoming a situation of a lot of money to move money and as we are entering this era in a digital century. The panels looking at the current Payment System followed by Digital Technology and stable coin potential solutions and we have remarkable keep notes from the ftb as well as, water of the bed and most of all we want to hear from you. This is an issue uniquely affected for each and everyone is us. Events ruppercaseletter, and future payments. We will introduce our fabulous panel which will be led by our leader, economic but the treasury market and its incredibly complex and hard topics believe she will do that for the panel so if you would like to join us on page. [applause] we have seen the Payment System over the past few years so the event is timely. We see nonbanks we have seen access to the payment rails and updates to the payment rails themselves. I have an excellent panel here today to talk about those things so the chiefe operating officer, julie hill at the university of Alabama School of law and cornell law. So lets jump right in. Dan, id like to start with you. The bundling of payments and how we see different sources performed by banks and now by other institutions. To whatt extent is the Current System working to what extent our current t policies holding . I guess i would devise the world institute, two segments here. Is it working, are people getting paid and make payments quickly, cheaply . On the other side, is it working from a policy perspective . Are we making sure the system is governed in ways that enable secure payments but also ongoing invasion overtime . I think we are not doing well on either and we can look at that domestically to the payments in the United States where a developed country is and a worldclass Financial System and especially poor people pay more in other countries. On the other side we also have the systems and emerging markets not invest in the payments so if you look to australia singapore and china, even the you and Good Government when it comes to financial market, they have invested in Building Infrastructure from a policy perspective to take advantage of all of the changes going on so i would say we are not doing great, are roadmaps were doing better. Onee what we can take from thos. Hand mark, you had an interestinger approach, a paymet service you provide so is it a good place or how could it be better . Look at the Payment System and is it working . Another thing about business payments, we basically say, is the system working well . This is where you do have divide, you look at middle to higher income population, it could be better. Not working badly. When you look at people working paycheck to paycheck, it is not working well in any way. We still have 67 of our population living paycheck to by the nation it is an indication that notot workin. To give an example, we look at bradley and include things like payroll, we have a lot of discussion from the policy perspective to understand communities and what we do. Two weeks for somebody to get there pay and consumers are lending money and having to borrow it from financial institutions. At a high level not working. Sort of on the back and, you are a world expert in the Federal Reserve system and we have gotten a lotot more information about who has the account. What does it say about the Payment System, what have we learned . One thing we know the book of the people using payment rails are banks that have deposits and bank loans and if you are making payments, chances are good that even if you use a non bank, its eventually going to get to a bank and get to the payment rails but the other thing have seen and make payments and want to make them with the Business Model that isnt just accepting deposits and we have not been very good about thinking about that space, what the payment might look like and whether they can use the Federal Reserve it its so far rather skeptical for some good reasons and some bad ereasons but fundamentally as a matter of law, not sure it is the feds decision to make. Congress was the one that creates laws around that so it is a bigger question than just the question of what the fed has done. Functional but not ideal. I did want to use your comments about congresses role here and who is in charge. There was a lot of talk as most of you will know, talking about charters, limited charters and institutionsns providing payment services. More recently there is talk from the Treasury Department about whether we should have separate federal payment so julie, is there a way to make federal policy on payments mo coherent, are either of those a good idea . Outside of the person who knows nothing and said Financial Regulation or payments regulation in a reasonable and efficient manner, with got all of these regulations. Back in thehe day i used to say its everybodys in charge and he is in charge. We have going on is so many regulators, they need to be in conversation and figure out who is in charge. And what they are not doing, really i think the possibility for the Regulatory Framework on congress and you all are as equipped as i am and how likely is to be able to develop this but it is a hard question and it is hard for regulators to agree on a piece of it. From a private perspective, what youou think would make thi . We are pro innovation and using this, we are a nonbank. Think about the response or competition it is amazing so we talk about. The competition coming from nonbank participants so we are pro innovation and we should create opportunities to participate as fully as possible. It will drive that down. We wouldnt be using it to ourselves in the financial services, we are pro inclusion here. Dan, to bring you in, i also do want to forget there is a whole mosaic of state regulation here, too. Dan, i know you have looked at this a bit, what you think about making it more coherent and where are we at the state level of regulation of Money Services . Mosaic is a good word but it can be beautiful in their complexity and fair toom say theres nothing about having 49 state regulators. There are 27 federal companies, 26 of them have federal regulation and then my work has done a lot shining light on how different some of that regulation is and how bad some of that is at the state level and it is a ticking time bomb. There is more and more that the inadequacy will cause problems. It already has caused problems, everybodys favorite in the news the last 12 months, the same regulatoryry framework in the payments. I am a fan predators only the beginning of the fundamental briefings. A charter is great but doesnt do much forut innovation and of itself, the safety and soundness but it is exposing work around access and around the government where the earlier part of your question, we dont need more regulator but we need more mandate. The occ and fed, they all relate payment institutions and none of those how the response ability for technological innovation or welfare letit alone individual personal honor and i would be most to the number of regulators and the discussion about adding to the list of things regulators come to take into account these other various important social policies. Tryingy out a couple of strings from that, you mentioned ftx which is sort of a poster child for the issue in the Payment System which is whether the funds are there i think when i think about facilitating payments, it raises a lot of questions about how people can be sure the money will go through. I think existing, i think that there are a lot of debates to the few things for a passionate for which regulators should be responsible for this. All of them have their bright spots in dark corners. But i do think creating a single federal Regulatory Framework for this isgl great with a single regulator. From there i also think if you want to do banking, get a banking license. The congress has added if you want to do banking without thinking what you should be able trto do with customer money shod be very limited. We have structures that enable us to put all of that money in one basket and watch it to misquote mark twain. We have thirdparty custodians. Have reserved accounts at central banks. We have accounts where becomes much easier to verify that the monetary liabilities and the total assets sitting in that account are the same. The backing that you have is relatively easy to monitor and verify over time. I am also interested in your take. So, i think i am less optimistic for the federal payments regulator for the regulation that we want in the payments space. I am much more i would say bullish on the possibilities that states could do a good job of having a team manager and that payments charter. I think that if you look out at what has happened so far, i think that states have kind of been on the forefront of how the payment charter may work. Certainly we have seen the litigation over the wyoming attempts to have a payment charter and connected to master accounts and now we are seeing other litigation. We have seen states taking the lead and adopting, watching Technology Laws and also a historical matter i think states have done a relatively good job enacting everybodys favorite, the uniform commercial code that is adopted state law which largely governs questions like what happens when payments go wrong. I am not as enthusiastic about saying we have to draw hope that the fed get this right and that spurs innovation because Everybody Knows what the law is. I have been somewhat skeptical that it is equipped to be a leader on this or beyond the fed i guess that i am still hopeful that there is some space for states and state regulation in the debate. I think i am probably a malittle bit more optimistic. I think the question goes to how do we make sure that money is there. The fed is quite wellpositioned for o that. We have responsive banking models. The regulator, it gives our members an efficient system. It gives them comfort that the funds will be there when they need to be there. I kind off want to ask a brod question from your perspective. Iwhen you think about the shortcomings of the Payment System, do you see it as a Technology Problem that needs to be solved with more innovation . I think that it is actually more of a policy problem. When you talk about the innovation system it is faster payment. Seeking out a few more hours, a few more days, a few more seconds instantly. That is important. The reality of those is the lack of a federal instant Payment System. What is happened is youve had private enterprise develop some of these systems. You have a number of solutions out there. They are not as good as had we had 20 years ago and instant Payment System. I have been encouraged by the degree of progress on that. If you think about the last five years and in terms of same days in realtime payments, you need to be able to keep up with that innovation in terms of faster payments. I think that that is been a real positive. From a policy perspective, i think that there is a long way to go still. I still come back to the points around the fact that, you know, in addition to technology, we need to have open data and we need to drive innovation and some of the inputs like payroll. If we really want to drive effectiveness in the Payment System. I think a lot of that falls on policy. Maybe we will hear from the director on some of that data question. I did want to ask you, i was given a perfect segue here. We have that now. We have the big bank infrastructure. How quickly do you think that this willwi take to actually really be felt . When do we get faster payments . I think that the jury is still out. I have been calling it fed in the future for so long. So nervous about calling it fed now. I think that that sort of illustrates the trouble with innovation coming from the government. Let me be clear. I totally understand why Community Banks wanted this now. I understand why if you are a Small Community bank it gives you heartburn to think that the fastest rail is the payment rail provided by the clearinghouse the largestss competitors that would just assume we dont exist i cant say that they have acted veinappropriately, but i can understand the Community Banks perspective. For it to be faster and more competitive. I think what we are still waiting to see is what exactly is the Community Banks doing now that it was operational. Do we think that they will embrace it. Do we think that wads of the payment payments that have been traditionally processed on the slower scales, i think a jury is still out based on whether this makes payment faster, whether it makes payment for consumers in particular faster or thirdparty innovations like time or nonbanks or what really drives faster payments for consumers. Dan, what do you think it will take to get this infrastructure to work . Should we do what aaron has m written many times . The fedeq changed policy to have banks make Funds Available immediately. There are many things that i love about aaron and many things that we agree on. I think that that will sale. If i try to imagine a system that was designed not to work, not a technological perspective, but a governance perspective, we are pretty close to it. The largest a banks will not use because they already built one. There is no competitive advantages over that system. Either in terms of the cost structure which is identical. In terms of the technology which is not inoperable. And in terms of what it inquires they do. I dont know if any of you have a bank that is signed up to the network. Of the 50 something banks that have signed up, most of them have signed up, actually, not most of them, simply to receive faster payment. We all like to get faster payment. That would be great if we got faster payment. If everyone just signed up to receive, nothing really happens. So the Community Banks that would most benefit from this, it involves huge payments necessary to do this. You have to build a webenabled interface that gives your customers the options to say i want to send the faster payment. We are not seeing a lot of uptick in that. Really i dont expect a lot of the inherent benefits of having an ati based Payment System really rollout until we move forward on open thinking and open finance. That iss the ticket of making this worth while. Dodd frank 10 30 three, the 13th anniversary is coming gone now. Fingers crossed for today, waiting for some of the leadership on that particular issue. That is the long way of saying we are nowhere where we should be on that. Where we need to be as understanding that having the Federal Reserve responsible for safety and soundness makes tons of sense. Delivering on Technological Infrastructure and promoting welfare pants will take more people. If this if you close your eyes and these types of issues were not in finance and banking, the current ftc would be all over this. Big incumbents controlling access to a set of reinfrastructure that results in consumer welfare process on a number of dimension. Anything other than finance, we probably would haveon moved on this a long time ago. I dont think that there is a single solution, but the first thing we need to do is admit that we have a problem. And then have honest discussions moving forward. I think that that is kind of what today is about. I did not know that i would be the glass is half full kind of person. You are from a private sector perspective. How are you thinking about realtime payment infrastructure are you wanting to use it . Where is it situated . I think that we probably shut down. The thing about it now to dans point is everybody has to create onramp to this. A User Experience one and incorporate us. I think the challenges most of us have already done that with limiting other technology. The most prevalent is probably the directors today. A lot of enterprises actually spent a lot of money integrating there are more banks that are able i to opt in and develop the infrastructure that is required. I think that you will find people adopting it. Therend is not a forced function of that system up front. It is not some