Welcome to the March 2023 Innovating Payments Executive Summary. In this issue, Federal bank regulatory agencies issued a joint statement highlighting liquidity risks to banking organizations associated with specific funding sources from crypto-asset-related entities. Also in the news, 33 percent of retailers plan to add real-time payment options for customers in the next three years. Nacha announced that the ACH Network moved 30 billion payments valued at $76.7 trillion in 2022, led by Same Day ACH and B2B growth.
Meanwhile, the Federal Reserve continues to zero in on fraud mitigation tools for the FedNow Service(SM), which is due to launch as early as May. And Zelle® saw a 40 percent increase in financial institutions joining the Zelle Network in 2022.
Read on to learn more.
The Federal Reserve
Agencies issue joint statement on liquidity risks resulting from crypto-asset market vulnerabilities
Federal bank regulatory agencies — the Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency — issued a joint statement on Feb. 23, highlighting liquidity risks to banking organizations associated with certain sources of funding from crypto-asset-related entities and some effective practices to manage those risks. “Recent events in the crypto-asset sector have underscored the potentially heightened liquidity risks presented by certain sources of funding from crypto-asset-related entities,” cautioned the agencies.
“The joint statement highlights key liquidity risks and some effective practices to monitor and appropriately manage those risks, said the Feb. 23 release. “The statement reminds banking organizations to apply existing risk management principles; it does not create new risk management principles.”
“Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation,” the release concludes.
The statement, in its entirety, is available to download here: Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities (PDF).
According to a Feb. 2023 report, Retail Payments innovation Year in Review: How Real-Time Payments Drive the In-Store Customer Journey, released by PYMNTS and ACI Worldwide, “Retailers implemented new payments strategies to maintain customer loyalty and increase engagement.
Between Jun. 1, 2022, and Jun. 21, 2022, PYMNTS and ACI Worldwide surveyed 300 retailers in the U.S. or the U.K. with at least 50 store locations and annual revenues of more than $1 billion for U.S.-based companies or £100 million (USD 127 million) for U.K. companies about the digital tools and technologies they currently use and their future innovation plans.
According to the report, 33 percent of U.S. retailers plan to add real-time payments in the next three years. As noted by the report:
PYMNTS' research shows that U.S. and U.K. retailers have set their sights on real-time payments. While only 2.6 percent of U.S. and 6 percent of U.K. retailers want to improve support for real-time payments, 33 percent and 43 percent, respectively, want to add support for real-time payments. Real-time payments and loyalty programs are intrinsically linked for many retailers, enabling them to engage further with returning customers at the point of sale.
Real-time payments is central to retailers' efforts to bring the speed and transparency of online shopping to in-store customer experiences. For instance, data tracking and loyalty programs are intrinsically linked with real-time payments, enabling ongoing customer engagement at the point of sale.
The data shows that, for retailers, the future is real-time payments. This heightened focus on real-time payments highlights new opportunities for financial institutions to offer businesses and their customers a comprehensive, real-time payments experience.
In other news, Nacha announced on Feb. 22 that the ACH Network safely and efficiently moved 30 billion payments valued at $76.7 trillion in 2022, increases of 3 percent and 4.6 percent, respectively, over 2021, led by growth in Same Day ACH and B2B.
“2022 marked the tenth consecutive year in which the total value of ACH payments increased by at least $1 trillion,” Nacha President and CEO Jane Larimer said in the release. “This underscores the fact that the ACH Network is an industrial-strength, modern payment system serving hundreds of millions of consumers, businesses and other organizations.”
“Same Day ACH is a key component of today’s ACH Network,” Larimer added, pointing to a 15.5% increase in same-day volume and a value increase of 86.3% for those payments, driven by an increase in the Same Day ACH dollar limit to $1 million.
“Among the other ACH Network highlights in 2022,” noted the release, “businesses continued to move away from checks, as shown in the 11.8% year-to-year increase in Business-to-Business (B2B) payments. Adoption of Same Day ACH for B2B payments increased 44% in 2022.”
Download Nacha’s infographic to learn more.
As reported by Payments Dive, the Federal Reserve is zeroing in on fraud mitigation tools for the launch of FedNow(SM), due to launch as early as May.
“Fraud management features are a high priority for (financial institutions) and are being tested along with transaction flows in the countdown to launch,” reported Payments Dive, citing FedNow Senior Vice President Nick Stanescu in a website post.
“The FedNow Service entered the final phases of testing and certification,” said the Payments Dive, “with an aim to make the service available sometime between May and July of this year.”
With the launch of FedNow, financial institutions can impose value limits for transactions and specify certain situations in which transactions would be rejected. Another built-in fraud check lets financial institutions check whether a message was altered in any way and provides options for running transaction reports.
To learn more about FedNow’s risk management capabilities, visit the Federal Reserve’s Explorer website.
Also in the news, Zelle reported on Feb. 16 that the number of financial institutions joining the Zelle Network increased by 40 percent in 2022. More than 1,800 financial institutions (FIs) are part of the Zelle Network. “In 2022, 97% of FIs that joined the network have under $10 billion in assets,” according to the release.
"Banks and credit unions of all sizes are joining the Zelle Network® at a rapid pace because it drives higher engagement with their customers and members and enables competitive parity with large banks via their mobile app," Al Ko, Chief Executive Officer at Early Warning, said in the release. "The sheer volume sent through our network— more than a trillion dollars in the past two years — shows that consumers and businesses trust Zelle® for the financial moments that matter."
According to an independent study by Curinos, Zelle “brought substantial value to customers and financial institutions.”
"Our study found that Zelle® drives more primacy to users' checking accounts," Hank Israel, Director at Curinos, said in the release. "The more people use Zelle®, the more they tap those same checking accounts to pay for goods and services they might otherwise have paid for with check, cash, or other P2P. "
Join us for our 2023 Payments Management Conference at the Foxwoods Resort and Casino, May 22-23. This one-of-a-kind conference gives you two days filled with education, networking, and opportunity. Attendees of the Payments Management Conference will include payments executives, strategists, managers, consultants, analysts, technologists, operations, and other payments professionals.
The conference sessions will address today’s most pressing issues, including some of those mentioned in this month’s executive summary. Here are just a few of the sessions we have lined up:
- FedNow(SM) Pilot Session
- A New ACH Risk Management Framework to Face Current Fraud Threats
- Cash App & Venmo Fraud Claims
Visit the NEACH website to learn more or to register. We hope to see you there!
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.