By Matt Grossman
The Federal Reserve should play a minimal, supportive role in payments infrastructure, letting the private sector take the lead, Fed governor Christopher Waller said Tuesday.
Speaking at a conference hosted by The Clearing House in New York, Waller said that private companies should innovate and compete to provide the best payment services to customers, with the Fed narrowly focused on addressing payment issues that the private sector can't, according to a published text of his remarks.
"Such competition can lead to better products and services for consumers as profit-seeking competitors look for opportunities to win over customers including through the adoption of new technologies," Waller said.
Waller criticized the view that the Fed should take up new technology to seize a bigger role in the payments arena, for example by creating a central bank digital currency.
"I believe this would be a policy mistake and a better approach is one in which the private sector continues to have a significant footprint, with the role of government limited," Waller said.
Since last year, the Fed has run a payment system, FedNow, that allows instant transfers between individuals and businesses through their banks. Running the platform is an appropriate role for the Fed because it allows coordination between thousands of U.S. banks, something the private sector might struggle with on its own, Waller said.
In general, though, the private sector is better suited to sorting out good and bad ideas as new technology arrives, Waller said, because private investors are more sensitive to the feedback of a free market.
"American entrepreneurship and technical prowess have generated exciting innovations in payments, and they will continue to do so," Waller said.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
11-12-24 1014ET
