US Federal Reserve pushes ahead with Faster Payments planning

US Federal Reserve pushes ahead with Faster Payments planning

The US Federal Reserve Board is pushing ahead with plans to further the introduction of faster retail payments as part of a broad effort to modernise the country's payments infrastructure.

The Reserve Banks released a consultation paper in September 2013 solciting comments on gaps and opportunities in the payment system. By the close of the consultation exercise in December, the Fed had received more than 200 responses, with more than half coming from non-banks.

Responses were submitted by individual financial institutions, businesses, payment networks and processors, software vendors, payment innovators, consultants, and consumers, as well as from trade groups representing financial institution and business members.

Sandra Pianalto, president of the Federal Reserve Bank of Cleveland and chair of the Financial Services Policy Committee, which issued the paper, says: "We are carefully reviewing the feedback that we have received on the consultation paper to identify common themes and issues for future focus, as well as insights into potential solutions."

In concert with this, the Reserve Banks have extended their information-gathering exercises to further explore the needs related to faster retail payments. They include research on end-user demand for specific payment attributes and an assessment of alternatives for speeding US payments. A third effort involves identifying gaps and opportunities related to payment system security.

Pianalto says updates will be shared with industry stakeholders in the coming months via a number of Fed and industry forums and communications.

"The Reserve Banks remain committed to the continual improvement of the US payment system and will work collaboratively with stakeholders this year and beyond to implement innovations that meet evolving end- user needs for speed, efficiency and security," she says.

Comments: (8)

Bo Harald
Bo Harald - Transmeri, Demos, Real Time Economy Program,MyData - Helsinki Region 05 February, 2014, 14:10Be the first to give this comment the thumbs up 0 likes

One must hope that this includes support for downstream automation - ie electronic invoicing as

1. automated payment initatior,

2. real time payments,

3. data extraction from e-invoices feeding automated sales tax reporting and payments,

4. e-invoice data feeding account statements to create automated accounting for SMEs (and automated cash flow estimates).

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 February, 2014, 15:361 like 1 like

Not sure how this tallies with the Nov. 2013 veto of such a faster payments system by American banks: 

http://www.americanbanker.com/issues/178_219/how-big-banks-killed-a-plan-to-speed-up-money-transfers-1063631-1.html

In any case, isn't "pushes ahead" an over optimistic assessment, considering the Fed seemingly has a 10 year horizon?    

http://www.americanbanker.com/issues/178_221/message-to-banks-speed-up-payments-or-fed-will-take-charge-1063690-1.html

Mark Mixter
Mark Mixter - Open Text - Chicago 06 February, 2014, 04:11Be the first to give this comment the thumbs up 0 likes

Pushing ahead - seems like just a bit of an overstatement.  Granted it's 'planning'.  Perhaps the Fed will be able to get this done faster than the EPC implemented SEPA

 

Bo Harald
Bo Harald - Transmeri, Demos, Real Time Economy Program,MyData - Helsinki Region 06 February, 2014, 07:35Be the first to give this comment the thumbs up 0 likes

See the big picture! Now is the time for automating - especially downstream for SMEs. 

 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 February, 2014, 08:00Be the first to give this comment the thumbs up 0 likes

@MarkM: Interesting that you've raised the comparison with EPC / SEPA. The way EPC can mandate SEPA for all banks in EU, does FED have similar power over the American banking industry? From what I know, a move like this requires a GO verdict by a supermajority of NACHA members. Given that they just took a NO GO decision a couple of months ago, what really are the options available to the FED?

A Finextra member
A Finextra member 06 February, 2014, 21:41Be the first to give this comment the thumbs up 0 likes

It's a healthy debate and modernisation is definitely overdue. Compared to countries like the UK that have successfully implemented Faster Payments, the business case will be further muddied by the impact on the high number of connected financial institutions (1000s). Whether a revamped ACH or a brand new network, I can't see the industry voluntarily implementing Faster Payments soon. Like Check21, I believe (regrettably) that this will only come from regulation.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 February, 2014, 11:16Be the first to give this comment the thumbs up 0 likes

@ColinK: Mint, Geezeo and other PFM players have managed to provide exemplary account aggregation across 7K+ banks in USA. You've hit the nail on the head by pointing to the need for regulation. However, I don't find this regrettable: Regulatory intervention has proven to be the most powerful driver of action by banks worldwide when it comes to measures that undermine their revenues and profits. OFT mandated FPS in UK. A subsidiary of the central bank even runs the FPS-equivalent scheme in India. 

Bo Harald
Bo Harald - Transmeri, Demos, Real Time Economy Program,MyData - Helsinki Region 10 February, 2014, 14:22Be the first to give this comment the thumbs up 0 likes

Payment automation cannot really be achieved without structured e-invoices. Not to talk about automated accounting, VAT and Sales Tax reporting. All standards are ready in ISO20022..

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