Welcome to the August 2024 Innovating Payments Executive Summary. In this issue, the Consumer Financial Protection Bureau (CFPB) joined several other federal financial regulatory agencies in announcing a proposed rule to establish data standards for certain information collections submitted to financial regulatory agencies. In addition, JPMorgan Chase said on Friday, Aug. 2, it is considering whether to sue CFPB over the agency's inquiries into the Zelle payment app. (This is a developing story. Look for more information as it becomes available.)
In other news, Nacha added four new categories—Account Validation, Fraud Monitoring, ISO 20022, and Open Banking—to its Preferred Partner Program. Nacha also announced that the ACH Network posted significant volume and value increases in Q2 of 2024, with Same Day ACH exceeding 100 million payments in a month for the first time in April 2024, with 107.8 million.
Also, in its first year of operation, FedNow surpassed the number of financial institution participants on RTP. However, several major top 10 U.S. banks—including Bank of America, Citigroup, PNC, and Capital One Financial—have yet to sign onto FedNow. In other news, The Clearing House Association (TCH), in partnership with the Bank Policy Institute, Consumer Bankers Association, and American Bankers Association, sent a letter to the CFPB calling for the Bureau to extend the compliance deadline for its forthcoming rule governing consumer financial data known as Section 1033.
Registration is now open for NEACH’s 2024 Future of Payments Symposium, Sept. 15-16, at the Hotel Viking Newport, Rhode Island. The event explores the ever-changing landscape through topics related to how institutions adapt, how their resources get repurposed, and how to plan for the long term.
Read on to learn more.
Consumer Financial Protection Bureau (CFPB)
CFPB Joins Federal Regulators to Propose Rule to Standardize Data Submitted to Federal Financial Agencies
On Aug. 2, the Consumer Financial Protection Bureau joined several other federal financial regulatory agencies in announcing a proposed rule to establish data standards for certain information collections submitted to financial regulatory agencies. The proposal would promote the interoperability of financial regulatory data across the agencies by establishing data standards for legal entity identifiers and other common identifiers.
The proposal is required by the Financial Data Transparency Act of 2022. Within two years of the final standards being established, the CFPB must finalize its own rule that adopts data standards for collections of information that are regularly filed with or submitted to the CFPB. Comments on the proposed rule are due 60 days following publication in the Federal Register.
Read the proposed rule and request for comment here.
JPMorgan Considers Suing CFPB Over Zelle
“JPMorgan Chase said on Friday [Aug. 2] it is considering whether to sue a U.S. consumer watchdog over the agency's inquiries into the Zelle payment app,” reported Reuters. “The bank said in a filing it is responding to queries from the Consumer Financial Protection Bureau (CFPB) over Zelle, which has grown to become the leading U.S. peer-to-peer payment network since launching in 2017. Zelle is owned by seven major banks, including JPMorgan and Bank of America.”
Fraud via Zelle has caught the attention of U.S. lawmakers, including Senator Elizabeth Warren, and regulators concerned about consumer protection. JPMorgan is considering settlement options or facing enforcement from the CFPB, stating that they already exceed legal requirements in reimbursing unauthorized transactions and some scams.
The CFPB declined to comment.
For more on this story, click here.
Nacha
Nacha Preferred Partner Program Adds Four New Categories
Four new Nacha Preferred Partners categories were unveiled on Aug. 1, doubling the number of categories available for organizations to showcase their leadership in the ACH Network. As noted by the Nacha Aug. 1 news release, the new categories are:
- Account Validation: Boost transaction accuracy and reduce risk on the ACH Network through advanced verification technologies, real-time validation, and fraud detection mechanisms.
- Fraud Monitoring: Enhancing ACH transaction security and reliability through machine learning, real-time data analysis, transaction patterns, and behavior analysis.
- ISO 20022: Enhancing interoperability and improving operational processes by translating ACH and ISO 20022 payment messaging.
- Open Banking: Advancing integration and collaboration between financial institutions and third-party service providers to facilitate ACH transactions, reinforce security, provide valuable data insights, improve access to the network, and enhance the customer experience.
This takes the total of Nacha Preferred Partner categories to seven. The original three are:
- ACH Experience: Removing friction and enhancing how customers send or receive ACH payments.
- Compliance: Complying with an existing, upcoming, or planned ACH Rule.
- Risk and Fraud Prevention: Implementing practices, tools, and solutions to mitigate ACH payment risk and fraud.
To learn more about the Nacha Preferred Partner program and how to join the 27 Preferred Partner organizations, visit https://www.nacha.org/preferred-partners.
Same Day ACH Reaches New Heights as ACH Network Volume Increased
Nacha reported that Same Day ACH soared to new heights of payment volume and value as the ACH Network posted significant volume and value increases in the second quarter of 2024.
There were 8.3 billion ACH payments in the second quarter, an increase of 6.3% over the same period in 2023. The dollar value of these ACH payments totaled $21.6 trillion, a 7% increase.
Same Day ACH exceeded 100 million payments in a month for the first time in April 2024, with 107.8 million. April also had the highest monthly value of Same Day ACH payments ($293 billion) and the highest average daily volume (4.9 million). In the second quarter of this year, there were 292.3 million Same Day ACH payments, up 46.6% from a year earlier. Same Day ACH payment values rose 31.1% to $803.3 billion for the second quarter.
“We cannot overstate the impact Same Day ACH is having to help meet America’s faster payment needs,” said Jane Larimer, Nacha President and CEO, in the release. “The proof is in the numbers that clearly show that Same Day ACH continues to gain acceptance among users of the payments system.”
FedNow®
FedNow Zooms Past RTP Participation in Inaugural Year
“With its first year of operation almost complete, the Federal Reserve’s new instant payments system, FedNow, has already surpassed the number of financial institution participants on the private real-time system known as RTP,” reported Payments Dive.
FedNow: Launched on July 20, 2023, and has attracted about 800 banks and credit unions since its launch. The Federal Reserve has not disclosed the volume of payments processed through FedNow.
RTP (Real-Time Payments) Network: Established by The Clearing House in 2017, this system has about 652 financial institutions participating. Following the launch of FedNow, the RTP network has also seen growth, possibly driven by the increased interest in real-time payments. The Clearing House has reported record transaction volumes in the second quarter, with a 7% increase in the number of transactions (82 million) and a 30% increase in the value of those transactions ($55 billion).
Both FedNow and RTP compete in the real-time payments space, with each seeing growth in the number of participating institutions and transaction volumes. However, FedNow has yet to disclose its transaction volumes, while RTP has shared detailed growth metrics.
Several major top 10 U.S. banks—including Bank of America, Citigroup, PNC, and Capital One Financial—have yet to sign onto FedNow.
Payments Dive concluded, “In a statement, Bank of America said: ‘We are very supportive of faster payments in the US, and we continue to monitor the FedNow network and its progress.’ A spokesperson for PNC said by email: ‘PNC is still in the process of evaluating FedNow.’ Capital One and Citigroup didn’t immediately respond to requests for comment.”
RTP®
Banks Urge CFPB to Extend Compliance Period for Consumer Financial Data Rule
The Clearing House Association (TCH), Bank Policy Institute, Consumer Bankers Association, and American Bankers Association sent a letter on July 16 to the Consumer Financial Protection Bureau calling for the Bureau to extend the compliance deadline for its forthcoming rule governing consumer financial data known as Section 1033, according to a TCH news release. The letter recommends that the first tier of banks required to comply with the rule be given at least two years to comply with the new rule. This would allow enough time for banks to develop new systems and processes and for a standard-setting organization to be recognized by the CFPB.
As stated in the release:
Banks spent years developing systems to enable safe data-sharing for 50 million customers, and overhauling these systems to comply with this new rule will take time,” the Association stated upon filing the letter. “In the interest of protecting customer data and avoiding disruptions, it’s better to get it done right than to get it done quickly. Banks are committed to serving their customers and complying with the law, and we encourage the CFPB to recognize the complexities of the new requirements and establish pragmatic timelines that allow for a smooth implementation with no disruptions to consumer data access.
The Associations called out significant operational hurdles in the letter, including:
- Implementation Challenges: Banks must upgrade technologies, standardize data, develop operational policies and procedures, build new functionalities, work with third-party partners, and refresh public-facing resources.
- Coordination and Collaboration: Agreements with existing third parties will need to be reviewed, and banks will need to coordinate with those entities to amend those agreements to meet the new obligations.
- Standard-Setting Procedures: The CFPB recently finalized a rule establishing the procedures for a standard-setting body to seek and obtain CFPB recognition, which will be a lengthy process. The process under which a standard-setting organization would develop consensus standards would take even more time.
To read the letter in its entirety, click here.
NEACH
Join NEACH on Sept. 15-16 at the Hotel Viking in Newport, RI, for the 2024 Future of Payments Symposium. This cornerstone event explores the ever-changing landscape through topics related to how institutions adapt, how their resources get repurposed, and how to plan for the long term. Technology strategic planning, customer needs, and regulatory constraints create a colorful tapestry of considerations that the 2024 Future of Payments Symposium will help attendees unravel during this lively event.
To learn more and to register, click here.
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AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.
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