Faster payments won't happen without cross-industry governance
In our increasingly mobile economy, Americans are demanding the ability to make payments to one another safely, anywhere, any time and with funds that are available immediately.
Just as cell phones make connections regardless of the brand or network provider, payments solutions also should work seamlessly to deliver a user experience that is efficient, broadly inclusive and highly secure. That’s why a task force coordinated by the Federal Reserve System last summer asked a diverse group of payments industry stakeholders, including myself, to help make this a reality in the United States in 2020.
Since then, a number of new and innovative faster payment solutions have come to market and others may be emerging soon. Each promises a better user experience that could potentially serve as the backbone of a ubiquitous world-class payment system.
But there are a number of important questions:
How do we facilitate interoperability so that payments and payment information move seamlessly for end users, regardless of the varied solutions they’re using?
How do we manage risk effectively to encourage trust and public confidence?
How do we ensure payers and payees have a consistent user experience where confirmation of a payment happens within seconds, even when the payment moves across solutions?
How can we ensure all parties have equitable access to an efficient system for resolving errors and disputes?
Clearly, a need exists for a governing body to make decisions and facilitate interoperability so that the United States can fulfill the industry’s goal for faster payments ubiquity in 2020.
Fortunately, the solution may be near.
The Governance Framework Formation Team (GFFT) is proposing a design for a faster payments governance framework, the U.S. Faster Payments Council (FPC).
The proposed U.S. Faster Payments Council will provide an inclusive and transparent forum for collaboration, problem-solving and decision-making as we face the challenge of building a ubiquitous, world-class payment system in the United States that adapts as technologies and user needs evolve.
The FPC will be governed by several guiding principles, including inclusiveness, fairness and flexibility as it strives for consensus on the issues that must be resolved to achieve ubiquity. It also will focus on removing barriers to network interoperability, enabling all end users to receive faster payments and making origination of faster payments more attractive to payers.
Because of its focus on facilitating dialogue and collaboration across the wide array of faster payments stakeholders, the FPC also will be in a unique position to address gaps and barriers that would be more difficult to address through bilateral cooperation alone.
And finally, the U.S. Faster Payments Council will become the go-to organization for thought leadership on faster payments by creating safe forums for dialogue that will support innovation, inform system design, and enhance cross-solution risk mitigation.
The FPC approach has been criticized by those who believe that any attempt to collaborate on significant change in our diverse payments landscape will be troubled by proprietary interests and a lack of cooperation. But that thinking does not fully appreciate the willingness of industry participants to produce a result together that none can produce by themselves.
As evidenced by the Faster Payments Task Force collaboration and the resulting GFFT effort to develop a governance framework, payment system change in the United States has always benefited from a consensus-driven approach that incorporates the views and behaviors of many, financial institutions, payment processors, technology providers, merchants, regulators, consumer advocates and others. Working together, we’ve been able to create better payment systems and drive widespread adoption for consumers, banks, financial institutions and market participants.
As the president of a small bank, I value the opportunity to have a voice in shaping the future of faster payments. The FPC will give me a unique opportunity to have a dialogue with like-minded leaders on the challenges and opportunities that small banks like mine face. This will be invaluable as investment decisions, customer experience, infrastructure needs and other key issues are contemplated and acted upon in the pursuit of ubiquitous faster payments.
The establishment of the FPC will help advance mutual cooperation on payments issues – and in so doing, guarantee a more effective and resilient payments system that will benefit the public and our economy as a whole.
The design of the FPC is a work in progress, so your feedback is important to ensure the FPC meets industry needs. Visit FedPaymentsImprovement.org to learn more.