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A group of US senators are urging the Federal Reserve to finalise rules expanding its settlement services to operate 24/7/365 to ensure faster access to funds while enhancing fraud protections and supporting smaller financial institutions.
The Democratic senators, led by Senator Sherrod Brown (D-OH), chair of the Senate Committee on Banking, Housing, and Urban Affairs, are urging the Fed to finalise new rules to expand instant payment services.
Senators Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), Tina Smith (D-MN) and John Fetterman (D-PA) have joined Brown in pressing Fed chair Jerome Powell to extend the operating hours of the central bank's settlement services to include weekends and holidays.
This expansion would allow Americans to access their funds 24 hours a day, seven days a week, 365 days a year.
This is already the case in the UK, via the Faster Payments Service, and will soon be enforceable in the eurozone as well, as a result of the Instant Payments Regulation (IPR).
The Fed’s settlement services, including the Fedwire Funds Service (FedWire) and National Settlement Service (NSS), facilitate the transfer of electronic funds through Automated Clearing House (ACH) payments.
However, these services often take days to process, creating financial challenges for consumers and small businesses.
Expanding its operating hours would help prevent overdraft and non-sufficient funds (NSF) fees and give businesses better cash flow to pay employees and settle debts.
"Given its ubiquity, it is no surprise that consumer and industry groups support expanding settlement services to weekends and holidays," the senators wrote in a letter to Powell.
"Expanding settlement services to weekends will benefit the millions of people who use ACH to pay their mortgages, rent, student loans, credit cards and many other payments. Faster payments help Americans gain access to their money, reducing the likelihood that they will overdraw their accounts or pay a NSF fee."
Some progress, but room for more
On May 3, 2024, the Federal Reserve proposed allowing FedWire and NSS to operate every day of the year, although their current hours — 9:00pm to 7:00pm ET for FedWire and 9:00pm to 6:30pm ET for NSS — would remain unchanged.
The senators consider this a positive step, but are pushing for more significant reforms to allow the services to operate 24/7/365.
The senators emphasise that the digital economy, where consumers can "book flights, buy concert tickets, and shop for gifts at all hours of the day", has made the current delays in receiving funds obsolete.
"For most Americans, it makes no sense that they must wait for their money to be deposited in their bank accounts," they said.
The expansion of settlement services would also benefit small businesses, many of which consider slow payments a top financial challenge.
"Improved cash flow provides businesses with greater liquidity, helping businesses maintain cash on hand to pay their workers, settle debts, and have a financial buffer in case of an emergency," the letter reads.
The senators also call on the Fed to implement stronger fraud protections as these services expand, urging it to "regularly assess potential operational risks" and ensure a robust risk-management framework.
Furthermore, they highlight the need to minimise the modernisation costs for community banks and smaller financial institutions.
The senators conclude by stressing the broader impact of these changes on the US economy.
"Finalising this rule and expanding Fedwire and NSS services to include weekends and holidays will strengthen our payment system and ensure that Americans using the ACH network gain swifter access to their funds."
