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America is slow to adopt immediate payments

I recently blogged about the lack of obvious return on investment for immediate (also called faster, instant or real-time) payments, and mentioned that I would be launching research about this.  Well that research survey is now live.  It will only take you ten minutes, so please join in by clicking this link.

Just to put this in context, there are some very good white papers out there on the subject.  I referred to a load of those in my last blog on the subject, but here’s a few more.

ACI/Accenture produced one, outlining that immediate payments (IP) does not mean same day processing but often does mean real-time payment with deferred settlement.  The key  is that IP systems guarantees immediate availability of funds to the beneficiary, and this means aiming to achieve the “benchmark for new IP infrastructures to target is 400ms, based on public transport applications, a stringent use case for payments”.

That’s a good benchmark.

In my last blog, I pointed to all of the different schemes around the world and yet, even though they started talking about it two years ago, the Federal Reserve has still not rolled out one for the USA.

They have provided a progress report two months ago, outlining their progress however.  Key achievements to date include:

  • Completed an independent assessment of 22 faster payments solution proposals against the Faster Payments Effectiveness Criteria released in February 2016
  • Analysed potential challenges to successful faster payments implementation, focusing on provider interoperability, rules and standards, governance, adoption, safety and security.
  • Published part one of a two-part final report that provides a high-level overview of the payments landscape, and the benefits of faster payments.
  • Launched work to address the industry’s most pressing payment system security issues: identity management, data protection, and fraud and risk information-sharing.
  • Mapped existing identity management practices in end-to-end payment flows in order to identify opportunities for improvements.
  • Defined the guiding principles for protecting sensitive data associated with payments, serving as a foundation for building a more comprehensive data protection framework for industry participants.
  • Inventoried current industry efforts to share information for fraud and risk prevention and mitigation.
  • Efforts to enhance payment system efficiency through work on standards, directories and business-to-business payment improvements.
  • Accelerated plans to implement the financial messaging standard ISO 20022 for U.S. wire transfer systems and widespread same-day ACH (automated clearing house) settlement.

In 2017, the Faster Payments and Payments Security Task Forces intend to:

  • Publish the final report, The U.S. Path to Faster Payments, in mid-2017 inclusive of part two – an in-depth report covering the assessment of faster payments solution proposals, challenges and opportunities for achieving faster payments in the United States, and the task force’s recommendations and suggestions for industry action
  • Determine next steps for industry collaboration to continue pursuit of safe, ubiquitous, faster payments capabilities for the United States
  • Develop a resource that outlines high-level payment identity management recommendations and industry perspectives to support payment industry participants as they evaluate their payment identity management landscape and related security plans
  • Develop a framework to identify and protect sensitive payment data at rest and in transit, leading toward a universal security baseline for the payments industry to help identify and appropriately manage risk throughout the payments process
  • Promote standardized requirements for collecting and reporting fraud data across industry segments and payment types and develop a framework to expand the availability and sharing of actionable information across the U.S. payments industry and globally to quickly identify risks and take timely action
  • Advance discussions regarding law and regulation challenges that impede advancement of payment security and engage with applicable policy makers, regulatory agencies and oversight bodies to foster improved payment security

Whilst the national FedWire and related systems look to upgrade, the competitive landscape has forced banks to be first movers anyway.  Thanks to the success of Venmo in particular, a consortium of banks holding the majority of U.S. consumer accounts will launch an instant payment system for person-to-person payments later this year.  The system will be called Zelle, and runs on Early Warning’s clearXchange which, for connected banks, allows individuals to send money by email and text message to people with accounts at other connected banks for their immediate use.  Banks involved so far include Bank of America Corp, Capital One Financial Corp, JPMorgan Chase, US Bancorp and Wells Fargo.


Anyways, if you are interested in the ROI in instant payments, join our research now by clicking on this link: https://www.surveymonkey.co.uk/r/paymentsinnovations2017

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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