COVID-19 brought with it many changes and highlighted the need for payments modernization. Although Massachusetts has begun taking its first steps toward reopening businesses, restaurants, and the like, we are left with the question: What will life look like for financial institutions post-COVID-19? What further complicates matters is that no two financial institutions are exactly alike. So what works for one financial institution may not work for another.
As you consider this month’s developments and headlines, review them with an eye toward the future. How will what is happening now shape the future? What does this mean for our financial institution? What steps can we take now to future-proof our institution?
NEACH is also exploring these questions on your behalf. We are committed to supporting you every step of the way as together we move toward the future and a new chapter in payments modernization.
Here are this month’s most compelling headlines:
Massachusetts' Reopening Plan
The governor of Massachusetts, Charles Baker, recently announced his plans for a phased reopening in the state. According to Boston.com, “The governor stressed that getting back to work and continuing to fight further transmission of COVID-19 will be “inseparable” in the state’s approach. “We cannot move forward unless we commit to continuing to slow the spread,” Governor Baker was quoted as saying.
The governor’s plans include four phases. Each phase will last approximately three weeks and hinge on public health data tracking COVID-19. All re-opening businesses must follow the state’s public health guidelines, which include social distancing and frequent hand-washing. But instead of venturing out, many will choose to remain “safer at home.”
In fact, according to Payments Journal, many prominent institutions and organizations will continue to allow employees to work from home. Capital One extended telecommuting until at least September and giants like Amazon and Microsoft have extended teleworking through October. In fact, a recent Gartner survey revealed a number of workers may continue to work from home permanently even after COVID-19.
As more Americans continue to work from home, what does this mean for payments?
Payments Journal raises this and other questions:
Will the overall number of transactions decrease as more people are working from home? Will people spend more to have food delivered to their home or will they spend more at their grocery store to buy food for lunch? What will this mean to gas stations, convenience stores, and coffee shops? How is mass transit going to be affected? Will the food trucks move to residential areas?
We don’t know. As noted in the article, it’s just too early to tell. However, it is not too early for companies in the payments industry to start thinking about questions like these, which can positively or negatively affect their institution, as together we navigate the changes ahead. Consider what your organization is doing and how it may or may not be forever changed by recent events. What needs to change?
Economic Income Payments
A news release, issued by the IRS on May 27, reminds taxpayers that some Electronic Impact Payments (EIP) payments are being sent by prepaid debit card. According to the release, “The debit cards arrive in a plain envelope form ‘Money Network Cardholder Services.’” Nearly 4 million people are due to receive their EIPs by prepaid debit card. The prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss, and other errors.
Speaking of EIPs, the first round of stimulus checks was supposed to be a one-off package, meant to boost a flagging economy. With several million checks still to go, Congress is already weighing whether a second round of stimulus checks might be necessary.
The Heroes Act (H.R. 6800), worth $3 trillion has already passed the House of Representatives. The package is now before the Senate. According to CNET.com, “The pushback to the Heroes Act is already strong among members of the Republican-controlled Senate. Senate Majority Leader Mitch McDonnell has said that the bill wouldn't pass as is.
NEACH will continue to update you on this story as it unfolds.
Increased Fraud and Unemployment Checks
In related news and as reported by the New York Times, the Fed suspects a vast fraud network is targeting U.S. unemployment systems. According to the Times:
A group of international fraudsters appears to have mounted an immense, sophisticated attack on U.S. unemployment systems, creating a network that has already siphoned millions of dollars in payments that were intended to avert an economic collapse, according to federal authorities.
The attackers have used detailed information about U.S. citizens, such as social security numbers that may have been obtained from cyber hacks of years past, to file claims on behalf of people who have not been laid off, officials said. The attack has exploited state unemployment systems at a time when they are straining to process a crush of claims from an employment crisis unmatched since the Great Depression.
Krebsonsecurity.com adds to the conversation. The online news portal quoted the U.S. Secret Service as saying there was “massive fraud” against state unemployment insurance programs, “with potential losses in the hundreds of millions of dollars.”
The Seattle Times reported:
Between March and April, the number of fraudulent claims for unemployment benefits jumped 27-fold to 700, the state Employment Security Department (ESD) told The Seattle Times. During that same period, the amount of money bled off by suspected fraudsters jumped from about $40,000 to nearly $1.6 million.
Financial institutions should be aware of the uptick in fraud and take steps to educate and protect customers and members against scammers.
Nacha Sponsors White Paper Researched by Mercator Advisory Group
Elsewhere in the industry, on May 28, Mercator Advisory Group released a white paper, sponsored by Nacha, titled, “The Expanding Role of ACH in the Era of Faster Payments.” The related Nacha news release states: “The paper also highlights how — as payments become faster — ACH supports the future of the industry with Same Day ACH, while providing money-movement infrastructure for many other payment products.”
“The modern ACH Network has achieved new transaction volume records as the preferred payment type in a diversity of use cases,” Jane Larimer, Nacha President and CEO was quoted as saying. “Even now, the ACH Network is operating normally and stands ready to serve America’s people, its businesses and nonprofits, and the government.”
According to the release, “The white paper also highlights several key attributes of the ACH Network that position it for the next generation of payments, including its ubiquity and efficiency, the Same Day ACH capability, and Nacha’s governance.”
You can download the white paper here.
Nacha requests comments on a set of proposals intended to deter and prevent the improper use of reversals and the harm it can cause various stakeholders and to improve Nacha’s ability to enforce the Rules in instances of egregious violations.
You can provide comments on this proposal using Survey Monkey via the link below:
According to Nacha’s website, the organization is also requesting “comments on a set of proposals that is intended to improve the capabilities of the ACH Network to validate and correct account information. These proposed changes would provide ACH Network participants with more reliable, low-cost, ACH Network-based solutions to validate a Receiver’s account. The set of proposals should be considered in its entirety in order to provide benefits to all parties in the ACH Network.”
You can comment on this proposal using Survey Monkey via the link below:
Faster Payments Council
On June 3, the Faster Payments Council released its “Faster Payments Interoperability” white paper. The white paper, which you can access here, offers insight into the various payment channels, their current condition, and how each settles. It deepens readers’ understanding of the challenges the payments ecosystem faces and builds a framework for understanding why interoperability is key to the success of faster payments.
The paper is broken out into sections that cover the various models uses, the settlement process for varying payments, and the use of overlay systems (such as Zelle and Venmo) within payments.
Real Time Payments Network
As reported by Tearsheet on May 12, Pegasus Bank, a $750-million-asset bank based in Dallas, is the first bank to connect to The Clearing House’s Real-Time Payments® (RTP) network through a third-party. Pegasus used Jack Henry for its integration.
According to Tearsheet, “The technology provider has more than 100 financial institutions using its faster payments hub, JHA PayCenter, to connect to Early Warning Services’ Zelle Network and The Clearing House’s RTP network.” Reportedly, more than 50 additional Jack Henry clients are scheduled to go live on the RTP network by year-end.
Also of note, Corporate One Federal Credit Union, a leading wholesale financial services provider to nearly 800 of America’s credit unions, has received certification to receive payments via the RTP® network developed by The Clearing House (TCH). Corporate One is the first corporate credit union and wholesale financial provider to receive such certification.
According to the company’s news release:
As a certified participant, Corporate One is now able to receive real-time payments for its corporate accounts. To receive participant certification, Corporate One partnered with its credit union service organization (CUSO), Sherpa Technologies, as the first credit union-specific, non-core third-party service provider (TPSP) to connect to the RTP network. A year ago, Sherpa established a relationship with ACI Worldwide and developed a suite of real-time payment services within the Mosaic framework, creating an extendable, open-payment platform for the credit union industry.
You can read the news release in its entirety here.
In Other News
The Financial Services Sector Coordinating Council for Critical Infrastructure Protection and Homeland Security recently released, its “Financial Sector Return to Normal Operations Resource Guide.” The guide is designed to help U.S. financial services decision-makers leverage the information to determine how to safely return workers to offices and other facilities.
The Guide covers such topics as:
- Status of COVID and state/local government restrictions
- Determining the readiness of your workforce and workplace
- Examples of considerations for specific facilities
- Maintaining continuity of operations
- Current financial sector regulations and reporting requirements
- Questions to consider for returning to the workplace aligned to local guidance
You can read the guide in its entirety here.
To keep NEACH members aware of important cybersecurity-related topics, NEACH is introducing monthly Cyber Watch posts in the discussion section of the Pacing Payments website. The posts will provide NEACH members with important industry updates related to cybersecurity topics.
You can read the first post here, but be sure to sign in first.
Again, to help you through these unprecedented times, NEACH has created a series of resources you may find helpful:
As always, NEACH's payments hotline is available to answer your questions on these or other topics. Call the Payments Hotline at 855-NEACH-QA.