The demand for faster/real-time payments is growing every day. In today’s increasingly mobile, digital economy, Americans are demanding that payments be safe, easy, fast, and available to everyone. The 2016 Federal Reserve Payments Study reported that American consumers and businesses generate more than 140 billion non-cash retail payments with a value of more than $175 trillion annually.
Despite this world-leading volume, the U.S. payments system is behind its global counterparts in its speed and efficiency, but that is about to change. And it’s going to change fast thanks to a proposal underway to establish a U.S. Faster Payments Council (FPC) — a proposed organization that will focus on facilitating the collaboration needed to develop and execute the faster payments road map to interoperability and ubiquity with a high-quality user experience by 2020.
Composed of a diverse group of stakeholders, many consider the FPC to be the biggest change to our payment system since the introduction of NACHA, the electronic payments network governing body established in 1974. It’s important for credit unions to have a voice in the FPC’s creation and future direction. A brief primer on where things stand with establishing the FPC follows.
Who is developing the FPC, and what is the timeline?
For the past year, I’ve been collaborating with other industry stakeholders as the sole credit union representative on the Governance Framework Formation Team (GFFT), a short-term working group established in late 2017 out of the Federal Reserve’s Faster Payments Task Force. The GFFT’s goal is to develop an inclusive, faster payments governance framework to make decisions to facilitate interoperability and achieve ubiquity of faster payments for the U.S. by 2020. Our work resulted in the creation of a draft operating vision for the FPC, made available for comment in April of this year.
June 22 marked the end of a 60-day stakeholder feedback period for this operating vision. The GFFT received a tremendous response to its proposed governance framework via an online survey, and supported by multiple webinars, conferences, and other engagement tactics. These inputs will be an important part of the GFFT’s team deliberations in creating a governance framework that meets the faster payments industry’s needs. The feedback received will be summarized into key themes by industry segment and compiled into a report that will be available later this summer.
What is the purpose of the FPC?
The FPC will focus on facilitating dialogue and collaboration across a wide array of stakeholders, and will have several purposes. Foremost among these are the following two goals:
To address gaps and barriers to faster payments adoption and support achievement of faster payments nationwide in 2020.
To create a safe, pervasive, world-class, faster-payments system where consumers, corporations, small business owners, and other end-users can pay anyone, anywhere, at any time with immediate funds availability, trust, and confidence.
The FPC will also aim to help all of these entities benefit from the following:
Payments and payment information that move seamlessly, regardless of the varied solutions they may traverse;
Effective cross-solution risk management that enables trust and public confidence in the safety and security of these new, interoperable faster payments to flourish;
Payers and payees receiving confirmation of a payment within seconds, even when the payment moves across solutions; and
All parties having equitable access to efficiently resolve disputes and errors.
How will the FPC be structured?
While we are still finalizing the details, it is planned that the FPC will reflect the diversity of payment industry stakeholders. The FPC will consist of a general membership, from which members of the board of directors, committees, and work groups will be drawn. FPC membership will be open to all stakeholders in the U.S. payment system: providers of payment services, including financial institutions, payment network operators, and technology providers; everyone who makes payments, including consumers, businesses, and government agencies; and regulators and those with a professional interest in improving the payment system.
The membership will then elect the board of directors who are accountable to the members for setting strategic direction and ensuring processes, activities, and decisions are consistent with the guiding principles of the FPC. The functions of the FPC will be carried out primarily by member volunteers who serve on FPC committees and work groups. Committees will be formal, standing groups established by the board, reporting to the board, and chaired by a board member. Work groups will have a well-defined tactical focus and reporting structure, may vary in duration, and are periodically evaluated by the board. Membership in committees and work groups will be open to all member volunteers, subject to the need to ensure balance, inclusivity, and effectiveness.
It's important to keep in mind that, ultimately, the FPC is envisioned to be a principle-based institution with the following guiding principles at the core of how it operates:
Openness and inclusiveness
Flexibility and responsiveness
Fairness and transparency
Why is it important for credit unions to be involved?
As we await finalization of the GFFT’s governance framework, fintech providers, financial institutions, and everyday consumers continue to fuel the reality of faster/real-time payments in the U.S. There is no doubt credit unions will need to respond to the growing expectations their members have for faster/real-time payments. Currently, the largest banks and financial institutions are leading the transition, but the creation and establishment of the FPC will help level the playing field by allowing all institutions to take advantage of faster/real-time payments opportunities.
I encourage you to remain engaged on the progress of the FPC by doing the following:
Visit FasterPaymentsTaskForce.org for more information or to engage in the next phase of the faster payments initiative.
Join the FedPayments Improvement Community. This community aims to provide opportunities for all stakeholders to engage in its full portfolio of payments improvement initiatives.
Stay current on trends and industry developments by attending conferences and workshops and engaging with your corporate credit union partner.
To help credit unions cut through the clutter of payments information, Corporate One, in collaboration with Payveris, a leading provider of digital payments and money movement technology, summarizes where we are to date with the adoption and implementation of real-time payments in the U.S. in a newly issued white paper.
Download the whitepaper: Preparing for real-time payments. Will you be ready?
Charles Harkness is SVP, Strategic Operations Officer, at Corporate One FCU and a GFFT member.