WASHINGTON (Reuters) - The U.S. Federal Reserve announced on Monday it planned to develop its own round-the-clock real-time payments and settlement service, with an expected launch in 2023 or 2024.

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The new service, dubbed FedNow, would compete with a private real-time payments system established by a group of large banks in 2017.

In a statement, the U.S. central bank said it was seeking public comment on the project, saying near-instantaneous transfer of funds 24 hours a day could yield economic benefits for individuals and businesses. Randal Quarles, the Fed’s vice chair for supervision, voted against the decision.

Smaller banks praised the move, which would allow them access to real-time payments without having to pay larger competitors for the service. But larger banks that have already built their own private infrastructure have been critical of the Fed potentially operating alongside them.

Fed Governor Lael Brainard said the Fed-run service would provide necessary competition, help ensure banks of all sizes have access to instant payment services, and improve the overall safety of the financial system.

“The U.S. real-time retail payment infrastructure stands to gain from competition, including through higher service quality and lower prices over the long run,” Brainard said in Kansas City.

In 2017, The Clearing House, a consortium of large banks, created its own real-time payments system. But smaller banks have resisted signing up, waiting to see if the Fed would offer a comparable service.

The current system operates under a similar structure, with the Fed and The Clearing House operating parallel services that can take several days to clear payments across financial institutions. Brainard said the Fed does not plan to stifle the privately-run system, and instead wants to continue cooperating with private-sector services while fostering competition.

Kansas City Fed President Esther George said the central bank would like to see the two systems be interoperable, but it remained to be seen how quickly the two could directly exchange payments.

In a statement, The Clearing House said it will track the Fed’s efforts while continuing to expand the reach of its system.

“Our focus will remain on ensuring that the RTP network has reach to all depository institutions,” the group said.

The Fed has studied real-time payments for several years, establishing a task force in 2015. And in October, it solicited public comment on building its own real-time payments system.

Brainard said 90 percent of the comments it received supported a Fed system.