Why Faster Payments Council is adding Goldman, Netflix and other advisor voices
The pandemic has spurred a major push toward speedier digital transactions, making it an expeditious time for the Faster Payments Council to expand the range of input it gets to expand its mission.
The board of the two-year-old Faster Payments Council has added an advisory group, expanding beyond the council's more than 20 sponsors and 150 members representing network providers, card issuers, security experts and retailers. The new group has 19 members, ranging from representatives of banks to credit unions, industry analysts and even Netflix.
The advisory group has no authoritative power over the council but its influence will come from the breadth of the new members. The council's roots date to 2015, when the U.S. Faster Payments Task Force, managed through the Federal Reserve, called for the creation of a new council devoted to keeping faster payments initiatives on track with a focus on the private sector. That stipulation was important, so as not to give the appearance that the council simply worked on behalf of the Federal Reserve.
"We can't have just the banks having the conversations, because there are other participants that come into play as well," said Bridget Hall, a member of the new advisory group representing the solution leadership team for real-time payments at ACI Worldwide.The advisory group comes amid two major initiatives to improve the speed of payment processing. The U.S. has seen the launch of The Clearing House Real-Time Payments network nearly three years ago, and the Federal Reserve is developing its own FedNow faster payments system to debut in a few years.
"We are seeing the benefits of the RTP and more people being in the conversation about what is happening in the marketplace and what could happen with new rails," Hall said. "The advisory group can provide additional perspective and insight as to what we think is going to happen or could happen in the marketplace based on our experience."
Much of that insight will help the FPC capitalize on some potential use cases and move quicker to establish those, in some cases, "based on what we have seen work in other parts of the world," Hall added.
The power of use cases
With much of the initial focus of the faster payments discussions at the Federal Reserve level focusing on cross-border B2B payments, it did not take long for those conversations to swing toward the power faster payments could bring to other verticals.
As a member of the new advisory group and the chairman of the Faster Payments Council's education and awareness work group, Charles Harkness of Corporate One Federal Credit Union has worked extensively on the development of new uses for faster payments.
"We want to help spur creativity in thinking about more use cases," said Harkness, senior vice president at his credit union. "An example would be how a back office can benefit from faster payments — and that creates a realization that we can look for other solutions out there."
The Request for Payment feature of faster payments is also a good example of how use cases can grow. "That feature will help everyone, especially in the bill-payment segment," Harkness added. "A utility could send a request for payment and have a phone number to send a request, with a link that allows a person to quickly make a payment."
The advisory group will help the council and its various working groups to "build a library of use cases" that will ultimately equate to the public becoming more aware of how faster payments can be used, Harkness said. "Once that is out there, you get more velocity in terms of adoption."
Voices for payments evolution
Because the payments ecosystem has so many different constituent parts from tech providers to merchants consumers, the Faster Payments Council has been in a good position to bring all of these voices together. The new advisory group simply adds to that chemistry.
"I can have a credit union representative to my left and someone from Netflix to my right, and where else can you get that?" asked advisory group member Michael Sklow, managing director and global head of treasury operations at investment bank Goldman Sachs.
The credit unions want a voice to assure they can advance payments technology as readily as the larger banks, and a company like Netflix represents the recurring billing and imbedded payments models that epitomize current digital processes and the potential to advance into other features.
"I view it as an evolution that started with FedWire, then ACH, then Same-Day ACH and then The Clearing House, and payments keep getting faster and faster," Sklow said. "As people get more familiar with the capability and rules around faster payments, the use cases will continue to grow pretty aggressively."
Goldman Sachs has a unique perspective on faster payments, which may explain why the bank was one of the initial sponsors of the Faster Payments Council.
"We work closely with the largest banks and understand the client side by being a large broker/dealer business," Sklow said. "We also have a provider perspective with the transaction banking business we just launched, and payments are fundamental to our business mix — especially in the last couple of years with the launch of our Marcus brand and the Apple Card."
In that regard, Sklow will bring Goldman insights on first-party payments and the ability to move money back and forth between bank accounts.
"It is good to have an industry group looking out for the user perspectives," Sklow added. "We may not be able to build consensus on all topics, but both members of the council and the advisory group will be funneling a lot of feedback into the Fed and The Clearing House, and that is a good thing."
All faster payments in play
The conversations among Faster Payments Council directors and members and, now, its advisory board members are shifting quickly to how to make banks, merchants and consumers more aware of the various faster payments methods available to ease payments concerns during the COVID-19 pandemic.
It brings the top P2P players in the bank-supported Zelle and PayPal's Venmo into more focus, and how those services, or ones like them, could translate to B2B or bill paying networks in the near future.
"It's going to be a world where both the P2P systems and major faster payment rails are complementary to each other," Sklow said. "But banks are being a bit more adoptive of the Fed and TCH-backed offerings, maybe more than they would for consortium-based offerings."
The key difference between The Clearing House RTP and other faster payments offerings comes in the settlement process behind the scenes at the banks.
"That's the real qualifier," said Corporate One's Harkness. "It is what makes it a true real-time payment when the settlement between two institutions can occur within seconds, as it does with the RTP."
Payments can occur instantly in other offerings, but they technically are not real-time payments because settlement may not occur until later in the day, or in batches at the end of a day, Harkness added.
In her real-time payments role at ACI, Hall has seen her company help many banks connect into the RTP rails and even help build payments infrastructure in places like Malaysia.
"The advisory group is driving the advancement of faster payments in the U.S., but we are different here from other countries in that there is no government mandate saying we have to do this," Hall noted.
"The group of individuals in this membership certainly see the benefit of faster payments and moving along the path of working together and understanding that a lot of different opinions will be tapped upon," Hall added. "The board of directors would make the final decision on where the FPC is going, but they are very open to hearing from the advisory group and membership as well."
Other members of the advisory group include Tony Cook of First Bank; Tim Dwyer of Nationwide Insurance; Brad Ganey of Catalyst Corporate FCU; Mary Gilmeister of MACHA; Rusiru Gunasena of Jack Henry; Jorge Jiminez of Juniper Payments and Josh Karoly of Netflix. Also, Jane Larimer of Nacha; Devon Marsh of Wells Fargo; Steve Mott of Better Buy Design; Gene Neyer of U.S. Bank; Judy Nguyen of American Express; Connie Theien of the Federal Reserve; Kevin Toner of MITRE Corporation; Steven Wasserman of Vments; and Laura Weinflash of Early Warning.