Why is the United States Lagging Behind in Payments?

The US plays a key role in the global financial system. At the same time, its payments system lags behind the global frontier. The primary task of any payment system is to move value in a low cost, convenient, and timely manner. Across all of these dimensions, the US experiences substantial frictions due to legacy infrastructure, market fragmentation, and lack of competition. Low-income households end up bearing the burden of these frictions, and there are stark income and racial differences in both access and participation in the financial system. In the absence of regulatory and technical developments targeted at improving market structure, lowering barriers to entry, and facilitating collaboration between public and private sector efforts in digital payments, these dynamics are unlikely to change.