Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States

A number of countries have implemented faster payment services that allow consumers and businesses to rapidly transfer money between bank accounts. These services compete with slower, existing payment services. In 2008, the United Kingdom implemented its Faster Payments Service (FPS) at a cost of less than ₤200 million (.014 percent of U.K. GDP, or $307 million) spread over seven years, plus investment costs borne by each participating bank to connect to the FPS. This paper examines the economic cost-benefit analysis underlying the U.K. FPS investment decision and describes the subsequent diffusion and use of FPS through 2013. The paper also assesses the effects that FPS likely had on the rest of the U.K. payment system and highlights key unanswered questions for future research. Based on this U.K. experience, the paper describes implications for the U.S. payment system, which the Federal Reserve has proposed to make faster in recent policy announcements.