FedPayments forum guiding the US toward a faster, safer, more efficient payment system
Last week I attended the Federal Reserve’s inaugural FedPayments Improvement Community Forum in Chicago which had six Fed COOs participating and the Fed Governor, Lael Brainard, giving the opening keynote. The purpose of the Forum was to drive workshop-style sessions to help influence and guide the United States’ journey toward a faster, safer, more efficient payment system.
Supporting Faster Payments in the US
During the forum we brainstormed ways to most effectively present the new payments capabilities to the country. For example, do we explain that the new real-time payments are immediately debited from the sender and credited to the receiver in irrevocable good funds, or to use Walmart’s John Drechny saying, “Don’t press GO until you know”?
Fed made excellent use of polling technology to assess current state of readiness to implement faster payments (with 52% aiming to be ready by 2020), the barriers to adoption and the opportunities to be harvested.
Fed announced that they are seeking comments on “actions the Federal Reserve could take to support faster payments in the United States. The potential actions, which would facilitate real-time interbank settlement of faster payments, build on collaborative work with the payment industry through the Federal Reserve System’s Strategies for Improving the U.S. Payment System (SIPS) initiative”.
The Board has made it clear that they are not committing to any specific course of action, but presented potential scenarios:
1. A service for 24x7x365 real-time interbank settlement of faster payments;
2. Liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis
Comments on the potential actions must be received on or before December 14, 2018*, but attendees of the forum, who – at over 200 strong, are a good representative sample of the industry, had an opportunity to share first reactions to this proposal with the Board and the Fed.
The liquidity tool proposal was warmly received by all. In fact, a few of us felt the liquidity tool (in combination with the changes to the settlement infrastructure) has the potential to advance other payments – e.g. make ACH available over the weekend and perhaps even improve the way off-shore dollar deposits are managed.
The 24x7x365 real-time interbank settlement of faster payments generated more discussion. Many of us were not sure (and perhaps this is ambiguous on purpose) whether this service will be similar to EU TIPS (where the European Central Bank actively competes with national clearing houses for bank business) or AU FSS (where the Reserve Bank of Australia is providing the certainty of the settlement but is not competing for bank’s clearing business).
The small and medium sized banks welcomed the more expansive role for the Fed with the view that more choice and competition is good and will result in a better service and pricing in the long term. On the other hand, many worried that this will delay adoption and put the goal of achieving ubiquity in 2020 at a very real risk.
So what did we take away?
The two days were very intense and the above commentary just scratches the surface of what was discussed. For me, the main take aways are:
• there is a level of excitement around US FPC with many attendees signaling their willingness to join;
• Fed continues to examine its role as a steward of the US payment ecosystem – taking both learnings from the similar initiatives in other countries and the inputs from its domestic stakeholders in order to make data-driven decisions in a transparent and unbiased manner.
We all have a role to play – learn about FPC, consider joining and provide your commentary on the Fed request for comment. In other words – stay informed, engaged and off the sidelines. Remember “Audentis Fortuna iuvat”**.
*You may submit comments, identified by Docket No. OP – 1625, by
- Agency Web Site Follow the instructions for submitting comments here
- E-mail Include docket number in the subject line of the message
**Fortune favors the brave. Virgil