CHICAGO -- At some point, the Federal Reserve Bank's three-year journey to create a faster payments system in the U.S. will run head long into one of its major challenges -- making sure it can operate within all networks.
"Given the nature of market-driven solutions, interoperability will be a key concern," said Esther L. George, president and CEO of the Federal Reserve Bank of Kansas City.
Interoperability represents one of the "current payments system gaps" that led to establishing the Faster Payments Task Force to formulate a plan to increase speed, efficiency and security in the U.S. system, George said in her keynote speech Oct. 12 to kick off the annual Chicago Payments Symposium. "Markets have produced a number of fragmented solutions that deliver desired functionality, but have failed to deliver a ubiquitous and seamless experience for end users," George said.
The task force revealed its current timeline last week for the faster payments initiative, while also noting it is reviewing 19 proposals from payments providers offering solutions as part of the development process. The ultimate goal of the private companies and the task force is to create a payments system available to users 24 hours a day, every day of the year.
"Interoperability requires careful consideration of rules, standards and governance," George said.
Consumers and payments officials alike take the ubiquity of debit and credit cards, ACH and check transactions for granted, George said. "But that interoperability we enjoy with these systems did not happen overnight," she added. "In fact, it took years and in some cases was cobbled together piece by piece across multiple providers."
More than 170 individuals joined the Secure Payments Task Force last year to examine the key issue of security in any new system. It will also tackle the challenge that, currently, there is "no universally accepted ways to establish and verify the identity of a payment system participant," George said.
Even though the U.S. payment system security is strong, improving it is still a major challenge, as is staying on top of the growing threats to the network, George said.
The Fed's priority for the initiative will remain the same, she said. The bank will "advance and support improvements that are in the public interest and will contribute to long-term financial stability and economic growth," George added.