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The Federal Reserve’s reduced role in retail payments: implications for efficiency and risk

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  • Richard J. Sullivan

Abstract

The Federal Reserve?s role in clearing and settling retail payments has declined in recent years. This stems not only from the expanding role of private-sector organizations, but also from the ongoing shift by consumers from paper checks to debit cards. ; Some suggest it would be most efficient for the Federal Reserve to offer settlement services mainly for payments among financial institutions, while others believe it should stay involved in retail payments as well. ; Sullivan argues that the Federal Reserve?s role in settling retail payments may actually promote efficiency, by providing a check against high industry concentration. Its involvement in retail payment settlement also bolsters the system?s integrity, providing a backup in case of operational failures in the industry, promoting efforts to manage operational risk and providing safe interbank settlement services.

Suggested Citation

  • Richard J. Sullivan, 2012. "The Federal Reserve’s reduced role in retail payments: implications for efficiency and risk," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q III).
    • Handle: RePEc:fip:fedker:y:2012:i:qiii:n:v.97no.3:x:2
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    References listed on IDEAS

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    Cited by:

    1. Richard J. Sullivan, 2013. "The impact of debit card regulation on checking account fees," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 59-93.
    2. Ortega, Fabio & León, Carlos, 2018. "Las transferencias procesadas por ACH Colombia: un análisis desde la perspectiva de topología de redes," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 88, pages 109-153, January.
    3. Fabio Ortega & Carlos León, 2017. "Las transferencias compensadas por ACH Colombia: Un análisis desde la perspectiva de topología de redes," Borradores de Economia 990, Banco de la Republica de Colombia.
    4. Fabio Ortega & Carlos León, 2018. "Transfers processed by ACH Colombia: a network topology analysis," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 88, pages 109-153, Enero - J.

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