By Daniel Gorfine, J. Christopher Giancarlo and Brian Peters
Please find here my co-authored piece published in the Milken Institute Review that makes the case for payments modernization in the U.S. Over the past decades, legacy payment systems have failed to modernize and seamlessly solve the challenges of consumers and businesses. Cross-border payment costs remain high, transaction speeds remain slow and overall adoption of digital technologies remains spotty. These challenges persist despite the U.S. having the deepest capital markets, the best talent, a large consumer base, and the world’s top technology hubs. It is time to recognize payments-focused innovators with modern chartering and licensing frameworks that grant them direct access to national payments systems and allow them to build for the future.
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Over the past decades, legacy bank payments systems in the U.S. that handle trillions of dollars in transactions each day have failed to modernize with an eye to seamlessly solving the challenges of consumers and businesses. Cross-border payment costs remain high, transaction speeds remain slow and overall adoption of digital technologies remains spotty. It is not surprising, then, that researchers at the Federal Reserve Bank of Richmond concluded the U.S. is lagging behind other countries in adopting mobile payments innovations, and researchers affiliated with MIT found that the “U.S. experiences substantial frictions due to legacy infrastructure, market fragmentation, and lack of competition.”
These challenges persist despite the U.S. having the deepest capital markets, the best talent, a large consumer base and the world’s top technology hubs. Europe, while lagging the U.S. economy overall, has produced more successful new payments and related fintech firms. What explains the paradox, and what could be done to restore U.S. leadership?
The failure to date is largely the result of outdated regulations and policies that have entrenched traditional banking models and locked in legacy money movement systems. Yet, making money movement more integrated, seamless and programmable would allow businesses to better serve customers and reduce costs. Additionally, reducing our singular reliance on banks that engage in maturity transformation — that is, borrow short and lend long — would reduce risk and increase system resilience.
While leading U.S. payments-focused firms have taken significant strides to solve these problems, more can be done by recognizing such firms with modern chartering and licensing frameworks — notably by including the option of a federal payments charter that permits direct access to national payments systems.
[The full piece can be found at https://www.milkenreview.org/articles/the-case-for-payments-modernization and was published on February 18, 2025]
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