Skip to Main Content

Economic Quarterly

Spring 1998

Can the Fed be a Payment System Innovator?

Jeffrey M. Lacker and John A. Weinberg

The payment system is a communications industry in which Federal Reserve Banks, in their check collection activities, provide communication services. The history of government intervention in other communications industries offers lessons for the Fed in its efforts at payment system innovation. Intervention, when it employs barriers to competition in the interest of promoting widespread access to services, weakens the incentives of market participants to adopt new technologies. Conversely, removing barriers to competition promotes efficient innovation but may also require some retreat from the goal of universal access.

Subscribe to Economic Quarterly

Receive an email notification when Economic Quarterly is posted online:

Subscribe to Economic Quarterly

By submitting this form you agree to the Bank's Terms & Conditions and Privacy Notice.

Phone Icon Contact Us

Lisa Davis (804) 697-8179