From Public Money to Public Rails: Reclaiming the Infrastructure of Money and Payments

The Problem

Money is a public good, but the infrastructure that moves it is fragmented and largely controlled by private intermediaries. Payment delays, transaction fees, and uneven access increase costs for workers and small businesses, making everyday financial life less affordable. For households living paycheck to paycheck, faster access to wages and benefits could reduce reliance on overdraft fees, check cashers, and other costly sources of short-term liquidity. As digital payments expand, this system risks becoming more expensive, exclusionary, and misaligned with public needs.

Past Failure to Solve the Problem

For decades, policymakers in both Democratic and Republican administrations have treated payments as a private market rather than essential infrastructure. As a result, banks, card networks, and fintech platforms have come to dominate how money moves, creating a fragmented system marked by delays, fees, and uneven access.

Recent reforms such as the Federal Reserve’s FedNow system have improved settlement speed but remain voluntary, fragmented, and dependent on financial institutions. Meanwhile, proposals that expand private stablecoin issuance risk further privatizing the payments system by embedding money movement within proprietary platforms where firms control access, pricing, and data.

Game Changer: Public Money on Public Rails

Ensuring that deposit-taking remains within regulated, insured institutions is critical, as outlined in Hilary Allen’s proposal, “A Return to Regulated Banking.” But even within that framework, the infrastructure that moves money remains fragmented, costly, and often misaligned with public needs.

The United States should build a modern system of public payment rails that ensures public money moves on public infrastructure. Payments should be treated like essential infrastructure, with a shared and interoperable core network governed in the public interest.

A U.S. system, informed by successful models such as Brazil’s Pix, would include several key components:

1. Real-time, 24/7 settlement in central bank money. Payments would clear instantly between institutions, eliminating payment delays.
2. Open and interoperable infrastructure. Banks, credit unions, and appropriately supervised payment providers could connect through standardized technical interfaces, allowing payments to move seamlessly across institutions.
3. Universal and low-cost access. Pricing would be structured around cost recovery rather than profit extraction, reducing costs for households and small businesses. Public support could help community banks and credit unions connect to the system.
4. Public governance with private innovation. The Federal Reserve and relevant regulators would oversee the core infrastructure while banks, credit unions, and other appropriately supervised providers compete to build customer-facing services on top.
5. Integration with government payments. Federal and state agencies would use the system to deliver tax refunds, benefits, disaster relief, and other payments instantly.
6. Complementary public options. Tools such as privacy-preserving digital cash (e.g. E-Cash) could expand payment access while coexisting with the regulated banking system.

Economic Rationale and Feasibility

Public rails for money would lower costs, strengthen economic resilience, and support competition.

First, a public system would reduce transaction and other costs. Today, households and small businesses bear the costs of payment fees, overdraft charges, and other frictions embedded throughout the financial system. Public infrastructure could significantly lower these costs.

Second, faster and more reliable payments would improve day-to-day economic security for households and small businesses. During the COVID-19 pandemic, millions of Americans waited weeks for relief payments because the existing system is slow and fragmented. Public payment rails would allow funds to reach households and businesses immediately.

Third, public infrastructure can promote competition. By ensuring that banks, credit unions, and other regulated providers operate on shared infrastructure, public rails reduce the ability of dominant firms to control access or extract rents. This complements broader efforts to curb concentration and strengthen competition across the economy.

International experience shows this model is feasible. Systems such as Brazil’s Pix demonstrate that publicly governed, real-time payment networks can scale rapidly, reduce costs, and expand access. Some estimates suggest that since its launch, Pix has saved consumers and businesses a total of R$106.7 billion.

While political and institutional barriers remain, there are multiple pathways for reform. Policymakers could pursue a more ambitious approach by building a comprehensive public payments platform or begin with incremental steps such as expanding FedNow participation, strengthening funds-availability requirements, and reducing barriers to access.
Modernizing payment infrastructure would help ensure that public money moves on infrastructure designed to serve the public interest rather than private gatekeepers.