This month’s news stories reflect the increasing shifts in payments in the U.S. and abroad, as the movement toward payments digitization, faster payments, and ubiquity across payment channels continues. But with that come potential upticks in fraud and a need for new ways to mitigate risk.
Highlights from this month’s summary include Nacha’s second quarter volume results, a newly released white paper from the Federal Reserve on mitigating synthetic identify fraud, and excerpts from The Committee on Banking, Housing, and Urban Affairs’ June hearing on the digitization of money and payments.
On July 15, Nacha released its second quarter volume results. “There were 6.6 billion payments made on the ACH Network during the quarter, reflecting a 7.9% increase over the same period in 2019, according to a Nacha news release. “The value of those payments was $14.7 trillion. Direct Deposit payments rose 17%, due in part to federal and state assistance payments made to Americans in need.”
Same Day ACH volume rose 37% over a year earlier, with 81.6 million payments. With Nacha increasing the allowable Same Day ACH transaction size to $100,00, the average dollar amount of a Same Day ACH payment rose by 33% in the second quarter, compared to the first quarter of 2020.
“ACH payments are for every day. As people, businesses, and governments adapt to new conditions, they can rely on the ACH Network to deliver pay and benefits on time, to pay their bills, and so much more,” Jane Larimer, Nacha CEO and president, was quoted as saying in the release.
To view Nacha second quarter results, download their infographic.
The Federal Reserve
Mitigating Synthetic Identity Fraud White Paper Released
The Federal Reserve released the third in a series of white papers on the topic of synthetic identity fraud. Released in July 2020, the white paper, Mitigating Synthetic Identity Fraud in the U.S. Payment System, “highlights different ways that organizations—both individually and collectively—can work to mitigate synthetic identity fraud.”
“The first paper focused on causes and contributing factors of synthetic identity fraud and its impact on the U.S. payment system, while the second focused on detecting synthetics and examples of sharing information across the industry,” Jim Cuhna, payments security strategy leader and fintech division head, SVP, Federal Reserve Bank of Boston, explained in his foreword to the paper. “This white paper picks up where our last one left off.”
The paper looks at various ways to mitigate synthetic identity fraud in the U.S. payments system, including information sharing among industry stakeholders and using technology—specifically, artificial intelligence (AI) and machine learning—to detect and mitigate synthetic identity fraud.
“A multilayered approach that employs both manual and technological data analysis gives organizations the best chance to identify and mitigate fraud caused by synthetics,” the paper concludes. “There is no one-size-fits-all solution.”
To read the paper in its entirety, click here.
Enhanced FedNow(SW) Community Page
As the Federal Reserve continues its work on the development of its real-time payment offering, the FedNow Service, it has expanded and enhanced its FedNow Community to include links to articles, industry polls, and more. The Fed plans to update the content regularly moving forward.
During the FedNow Community kickoff webinar on June 24, the Fed also announced plans to create a series of workgroups to support the development of the FedNow Service. According to its website: “The FedNow ISO 20022 Working Group will be the first of the series to kick off this July and will obtain feedback from a diverse group of industry stakeholders to inform and refine the FedNow ISO 20022 message specifications.”
To learn more about this workgroup and to take the IS0 20022 poll, click here.
And for updates on the FedNow Service, visit the FedNow Service webpage.
The Digitization of Money and Payments
The Committee on Banking, Housing, and Urban Affairs met remotely on June 30, 2020, to conduct a hearing titled, “The Digitization of Money and Payments.”
In his opening remarks, U.S. Senator Mike Crapo (R-Idaho), Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, pointed to the impact the coronavirus pandemic has had on the acceleration of the digitization of money and payments:
“The COVID-19 pandemic has forced us all to ‘go digital’ at a rapid pace, turning to our phones or computers to work, shop, communicate, and provide or receive services. This has highlighted the incredible innovation of banks, fintech and payment companies to facilitate commerce at speed and scale. It has also challenged us to reexamine issues of financial inclusion, and consider different ways to think about money and payments.”
In his testimony, the Hon. J. Christopher Giancarlo, senior counsel at Willkie Farr & Gallagher LLP and former chairman of the U.S. Commodity Futures Trading, made a case for a U.S. Central Bank Digital Currency (US CBDC), calling out, among other things, the aging of our existing financial market infrastructure and the economic and social benefits of acting.
Giancarlo is also the founder and principal of the Digital Dollar Project, a partnership between Accenture (NYSE: ACN) and the Digital Dollar Foundation, to advance exploration of a United States Central Bank Digital Currency (CBDC).
Concluding his remarks, Giancarlo said:
A new technological age is unfolding, bringing with it the digitization of things of value that can be tokenized, decentralized, and programmed. Across the globe, governments and private entities are experimenting with tokenized, commodities, contracts, legal titles and, most critically, commercial and central bank digital currencies. A US CBDC would address limitations in the ability to distribute emergency monetary relief revealed by the COVID-19 crisis. It can provide the tools and infrastructure to make emergency liquidity distribution work better and faster. It can provide advantages over traditional bank accounts in terms of expanding access for underserved populations and a foundation for new and more inclusive financial services.
To read the witness testimony of Giancarlo in its entirety and the testimony of the witnesses that testified before The Committee on Banking, Housing, and Urban Affairs, click here.
ASC X9 Expands Mission of Corporate Banking Committee to Focus on Faster/Real-Time Payments
The Accredited Standards Committee X9 Inc. announced July 21 that it has expanded the scope of its X9C Corporate Banking Committee to add a focus on faster/real-time payments. According to the release, “The group is newly
empowered to track all faster payments activity in the financial industry, and the intent is for it to become X9's central point of contact for industry standards related to this area.”
X9C stated that it will work closely with the Federal Reserve, The Clearing House, the Faster Payments Council, SWIFT, and other prominent clearing and standards organizations as they introduce these payment methods to the corporate community.
The new X9C agenda incorporates working on and supporting standards for both B2B and B2C payments activity, building on work that includes developing the recently revised codes list for the X9.121 Balance and Transaction Reporting Standard (BTRS), the release says. The revision gives financial institutions and service providers a common specification to ensure consistency in real-time payments reporting.
We will provide updates on this story as they become available.
Easier Cross-Border Payments
As reported in the Payments and Financial Services section of the Global Government Forum, a group of central banks seeking to improve cross-border payments are calling for more alignment on Application Programming Interface (API) and money laundering rules to support easier international payments.
Enhancing cross-border payments: building blocks of a global roadmap, published by the Bank of International Settlements’ Committee on Payments and Market Infrastructures (CPMI), contains 19 “building blocks for a global roadmap” broken down into five focus areas:
- Public and private sector to commit jointly to enhance cross-border payments
- Coordinate regulatory, supervisory, and oversight frameworks
- Improve existing payment infrastructures and arrangements to support the requirements of the cross-border payments market
- Increase data quality and straight-through-processing by enhancing data and market practices
- Explore the potential role of new payment infrastructures and arrangements
“Faster, cheaper, more transparent and more inclusive cross-border payment services would have widespread benefits for citizens and businesses worldwide, supporting economic growth, international trade, global development, and financial inclusion,” said CPMI chairman Sir Jon Cunliffe, who is the Bank of England’s deputy governor to The Global Government Forum. “If anything, [central banks’] role is more important in view of accelerating digital innovation and the challenges posed by the pandemic.”
European Payments Initiative
Europe may be gearing up to create a home-grown payment alternative to the U.S. card rails. Currently, they rely on U.S. infrastructure. The European Central Bank (ECB), in a recent news release, announced that it “welcomes the decision by 16 European banks to launch the European Payments Initiative.”
As noted in the release, “This initiative aims to create a unified payment solution for consumers and merchants across Europe, encompassing a payment card and a digital wallet and covering in-store, online, and person-to-person payments as well as cash withdrawals.”
Although significant progress has been made towards a safe, efficient, and integrated European payments market, fragmentation persists across the European Union in the way people pay, whether that be online or on-site in brick and mortar shops.
“The European Payments Initiative will have to tackle the fragmentation in European retail payments and should encompass all Euro area countries, and eventually the entire European Union,” said ECB Executive Board member Fabio Panetta in the release. “The foreseen effective implementation and a growing number of participants have the potential to strengthen the role of European providers.”
NEACH: Your Strategic Partner
As payments continue to evolve at the regional, national, and international levels, NEACH is here to help. We are your strategic partner and stand ready to offer our support. For questions, call our Payments Hotline at 855-NEACHQA or send an email to firstname.lastname@example.org and we will direct your request to the appropriate person.