Could new payments council push Fed to move faster?
The new U.S. Faster Payments Council states a clear mission — to promote faster payments in the U.S. But this new entity could butt heads with the Federal Reserve if it thinks the Fed isn't moving fast enough.
The new council, formed through recommendations from a Fed panel, has enough of the Fed's development plans and guidelines in its bloodstream to keep technology moving forward — at least for now. Still, it is certain that most stakeholders would want to avoid a slow-down of any sort of faster payments development, such as the one Nacha was dealt this week by the Fed in delaying a time frame for adding a faster level of the Same-Day ACH service.
The incident reminded all stakeholders that the Fed's rules and timelines for preparing for system improvements are far different from those of individual networks or developers, including those who formed the new council.
"Faster payments is an industrywide effort, driven by financial institutions, payment network operators, technology providers, business end-users, consumer organizations and others," said Kevin Christensen, the FPC's acting executive director and interim board chair. "The Fed is one key stakeholder in that mix."
On paper, the list of founding sponsors of the new U.S. Faster Payments Council reads as one would expect. It contains many of the major network providers, card issuers, security experts and major retailers.
The 20 sponsors and more than 140 members of the new council, which launched late last year, have generally had voices on similar Federal Reserve committees and have worked together — or against each other — in other projects from security to EMV transaction routing and interchange fees.
FPC sponsors include Shazam, ICBA Bancard, Visa, Bank of New York Mellon, North American Banking Company, Open Payment Network, The Clearing House, the New England ACH Association, Ceridian, Mastercard, JPMorgan Chase, Walmart, Bankers' Bank, Corporate One Federal Credit Union, The Bankers Bank, Early Warning Services, Target Corporation, Goldman Sachs Bank USA, First Data and TD Bank.
The council has its roots in the U.S. Faster Payments Task Force facilitated through the Fed in 2015, where stakeholders established an outline for achieving a highly secure faster payments system. In 2017, that group ultimately targeted the creation of a new organization as a key step.
While the stated emphasis of the new council is to develop faster payments through the private sector, it does not mean it will become a renegade offshoot of the Fed's committees.
The council will be a "solution-agnostic organization" that will facilitate faster payments based on input from a broad range of industry participants, Christensen said.
When the 27-member Governance Framework Formation Team at the Fed proposed what an FPC would be and how it would operate, it realized interest was high as it generated more than 1,000 comments from industry stakeholders in an online open forum.
At that time, the Fed was pleased with the FPC concept and "this next step in the evolution of the U.S. payment system," said Sean Rodriguez, Federal Reserve executive vice president and faster payments strategy leader.
"We commend the GFFT's efforts to come together and embrace the need for a new organization that will help facilitate efforts to modernize our country's payments system and allow everyone — providers, consumers, businesses and more — to benefit from faster payments," Rodriguez said in a FedPayments Improvement press release.
The council will have a good framework from which to base its research and recommendations, as the The Clearing House Real-Time Payments system launched in November of 2017. Those new rails, along with efforts by Nacha for Same-Day ACH payments a year earlier, showed that the Fed message was being heard.
It just remained unclear as to what would happen next, who would do it, and what role the Fed would have. The FPC views itself as at least part of that answer.
Still, there will be members who favor the TCH rails, and others who will prefer the Fed become the builder of a real-time solution. And there will also be vested interests for Visa and Mastercard on how debit push payments are handled, as well as P2P providers like Early Warning.
"From an independent viewpoint, I am certain that each and every one of the participants in the new council has an opinion on which rail or rails they prefer," said Sarah Grotta, director of debit card advisory for Boston-based Mercator Advisory Group. Grotta recently joined the council as a member.
"The working groups are looking at this from the perspective that there will be multiple rails or solutions in the U.S. and that conclusion will be taken into consideration when ideas are presented or best practices are created," Grotta added.
From that regard, the FPC clearly knows what it has in front of it during its formative months.
"When we look at the differentiated requirements of various organizations, we recognize that faster payments must fill a host of unique use cases," Christensen said. "Our job as the U.S. Faster Payments Council is to convene industry stakeholders in achieving the vision of ubiquitous faster payments."
The council is fueled by the fact that the Federal Reserve's proposal on Real-Time Gross Settlement received more than 400 comments during a public feedback period.
"We see this as a point of continuing dialogue for the industry — and a key focus of ongoing FPC conversations," Christensen added. The council's ultimate goal is to drive that sort of industry dialogue and decisions toward a ubiquitous payment system that allows American consumers to safely and securely pay anyone, anywhere, at any time, he added.
It might be a stretch to consider the FPC as the group that will break through with a single faster payments network for all users. It's not really looking to achieve that type of lofty goal. Ultimately, payments industry stakeholders can expect the council to deliver guidelines and best practices in support of faster payments in the U.S.
"What sets the FPC apart isn't just what it is going to do, but how it is going to do it," Christensen said. "As a principles-based organization, the FPC's structure, operations and activities are designed to adhere to the fundamental principles of inclusiveness and fairness; flexibility and responsiveness; and transparency in decision-making."
The council is planning its first board election and is targeting the end of May for its first board meeting. The structure for work groups and committees and the chain of command will be clearer when the board is in place.