In June, Facebook revealed the details of its proposed cryptocurrency, Libra, which will let you buy things or send money to people with nearly zero fees. Jennifer Tescher, founder and CEO of the Financial Health Network, raises concerns about Libra in her Forbes Opinion piece. She notes that while it’s received a ‘cool reception from critics, partners and politicians, the Federal Reserve Chairman Jerome Powell will have a final say as he finds that Libra “cannot go forward” without further studies and regulator support.
“We all know that could take a while. So, in the meantime, here’s a suggestion: Powell should pull the trigger and instruct the Fed to deliver on faster payments,” Tescher writes.
“The irony is, the lack of a ubiquitous real-time payments system in the United States is one of the factors driving the creation of alternative payment systems like Libra in the first place. While one of the main use cases for Libra is to ease cross-border remittances, our country’s slow payments infrastructure exacerbates the financial challenges of those living paycheck to paycheck. That’s a problem the Fed can solve now.”
“With nearly half of workers earning $15/hour or less, and 39% of Americans challenged to come up with $400 in an emergency, the one- to three-day gap between payday and when the money is actually available creates stress, drives up fees, and leads to increased credit usage for day-to-day expenses,” she notes. “These cash flow gaps are one of the reasons more than a third of people say they can’t pay all their bills on time, an important indicator of financial health. A worker who is paid on a Thursday and has a bill due on a Friday runs the risk of incurring a late fee from the biller, or getting charged an overdraft fee from her bank, or both. If you’ve ever wondered why people would pay a fee to cash a check, this timing gap is one of the main culprits. Other people use credit cards to bridge the gap and, when the card is maxed out, some turn to payday loans.”