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What is the single most important evolution in payments today, and why?

Dan Littman
Dan Littman, Policy Advisor

As appeared in the Cleveland Fed Digest's Ask the Expert on 06.27.2017

Issue #4 | June 27, 2017

Electronic networks. Payments went from an entirely paper world in the 1950s and 1960s to a largely electronic world today, allowing for point-of-sale transactions, debit and credit cards, Internet and mobile banking, and check image clearing. These conveniences were enabled by banks’ adopting computers and taking advantage of modern telecommunications systems.

Some other countries have new systems called “faster” or “real-time” payments that allow individuals and businesses to send payments to each other in a matter of seconds. In the United States, we’re moving toward faster payments, too. The Fed has been collaborating with commercial banks, credit unions, and other stakeholders to bring the system to market, but the country has some unique constraints: a huge number of depository institutions (roughly 13,000), a complex payments system, and the fact that bank regulators don’t have legal authority to demand far-reaching changes from the private sector.

In late 2017 and 2018, we’ll start to see advertising for near-real-time payment services from banks and credit unions, along with products for sending “instant” payments to one another through smart phones and online banking services. These products are likely to supplant other payment methods such as checks and cash and make newer payment access devices such as payment apps on smart phones much more popular.

Check out more

Dan Littman, a policy advisor for the Cleveland Fed, has studied payments for 3 decades. Read more about the Federal Reserve’s faster payments initiative at Also, Dan writes about the US payments system regularly in his Cash Per Diem blog.

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