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Nonbanks in the payments system

Nonbanks in the payments system

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Nonbanks have come to play an increasingly prominent role in the US payments system in recent years, raising important questions for banks, consumers and policy makers. This research paper from the Federal Reserve Bank of Kansas City's Payments System Research Department, begins to address the issues raised.

The research paper's preliminary findings include:
  • Nonbanks are involved in a myriad of activities and roles, both in traditional and emerging payments types;
  • Nonbank business relationships with banks and other participants in the payments systems are often highly complex and interrelated;
  • Nonbanks are rarely directly involved in settlement activities and, hence, appear to be associated with limited settlement and systemic risk;
  • Both nonbanks and banks appear to be increasingly susceptible to operational risk factors.

The paper's authors are vice president and economist Stuart E. Weiner, payments system research specialist Terri Bradford and automated clearing house product specialist Matt Davies.

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