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How Central Banks Are Building Real-Time Payment Systems
Description
This episode of Monetary Policy Explained examines the quiet revolution in central bank payment infrastructure. Lucas and Luna explore how the Federal Reserve's FedNow service, launched in 2023, is competing with private real-time payment networks like The Clearing House's RTP. They discuss why the ECB's TARGET Instant Payment Settlement (TIPS) processed over 300 million transactions in 2025, how the Bank of England is testing a wholesale CBDC for interbank settlements, and what this means for the speed of monetary transmission. The hosts break down how instant settlement changes the plumbing of monetary policy—reducing counterparty risk, compressing settlement windows, and potentially giving central banks a new channel for implementing negative rates or fiscal transfers. They also touch on the geopolitical angle: emerging economies like India's UPI and Brazil's Pix leapfrogging legacy infrastructure, and what that means for dollar hegemony. Specific numbers include FedNow's current 700+ participant institutions and Pix's 170 million users. A concrete, numbers-driven look at the pipes behind policy.