Welcome to the Dec. 2022 issue of NEACH's Innovating Payments Executive Summary. This month's top stories include new findings from PSCU's Eye on Payments Study, which reveals a changing payments landscape and emerging opportunities for financial institutions. Also in the news, the Federal Reserve announced its fee schedule for 2023, including the FedNow(SM) Service pricing. Nacha announced the release of its publication, Voice Payments: Guide to Nacha’s Operating Rules.
Further, according to the New York Times, the seven financial institutions that own Zelle are planning for a major rule change next year that will require the network’s member banks to compensate customers who fall victim to certain kinds of scams. Finally, Elon Musk announced plans for Twitter to enter the payments space. Musk also mused about consumers linking their bank accounts with the social media platform at a later date.
For more on these and other stories, read on.
Key findings from PSCU’s 2022 Eye on Payments Study reveal a changing payments landscape, says Payments Journal. The study, conducted annually for the past five years, reports that consumers are turning to digital payment solutions in record numbers, with 59 percent of respondents using a digital payment method occasionally. But with an increase in digital channels comes an increasing concern in fraud, according to the report. In fact, 53 percent of respondents expressed concerns around fraud with digital channels and platforms.
The report also identified opportunities for financial institutions around digital card issuance. “About one in four respondents indicated that they’ve received a digital version of their card while waiting for the [physical card] to arrive,” Norm Patrick, Vice President of Advisors Plus Consulting at PSCU, told Payments Journal. “When you’re looking at takeaways from there, card issuance seems to be a very big opportunity for consumers. And as we continue to proliferate with those types of solutions in the market, there needs to be education not only to encourage adoption, but the actual usage is absolutely key.”
Other key findings from the report include the following:
- 50 percent plus plan to use a digital payment solution like Venmo in the next six months
- 46 percent of credit union members and 42% of non-credit union members favor debit cards, making it the preferred choice of payment
- 60% of those who know their financial institution offers a buy-now-pay-later (BNPL) solution report having used it
- From 2019 to 2022, there was a 35 percent increase in respondents that reported using a mobile wallet in the past 50 days to pay for something in a physical store.
- Millennials are the most proficient users of mobile wallets, turning to this payment type on a monthly (31 percent) and weekly (21 percent) basis.
For more on these and other relevant findings, click here.
The Federal Reserve 2023 Fee Schedule
The Federal Reserve Board on November 3 announced pricing, effective January 3, 2023, for payment services the Federal Reserve Banks provide to depository institutions, such as clearing checks, ACH transactions, and wholesale payment and settlement services. Overall, the Reserve Banks estimate that the price changes for 2023 will result in a 2.9 percent average price increase.
According to the Fed, the Board also announced the 2023 pricing for the FedNowSM Service, a real-time payments platform targeted to launch between May and July next year. The pricing is substantially similar to the anticipated pricing announced on January 27, 2022.
The 2023 fee schedule for each priced service, including the FedNow Service, is listed in the Federal Register notice and will be published on FRBservices.org(SM).
Voice Payments: Guide to Nacha’s Operating Rules
Nacha's Payments Innovation Alliance has created a new resource aimed at financial institutions, billers, and payments processors, according to a Nacha news release. Voice Payments: Guide to Nacha’s Operating Rules identifies the most common conversational payments use cases, offers answers to frequently asked questions, and assists in determining the Standard Entry Class (SEC) Codes for consumer bill payment use cases using voice-assisted devices or smart speakers for ACH payments.
"Over the past two years, Nacha has updated its Operating Rules and Guidelines to reflect emerging technology, including voice payments within the ACH Network. Voice Payments: Guide to Nacha’s Operating Rules assists by identifying the specific provisions that apply in a variety of use cases,” Jennifer West, AAP, APRP, Senior Director, Payments Innovation Alliance, Nacha said in the release.
The publication offers guidance to financial institutions, billers, and payments processors and includes a series of conversational, payments-focused Executive Briefings; Voice Payments: An Introduction and Overview; A Deep Dive into the Technology Behind Voice Payments; and Voice Payments: Contractual Considerations for Financial Institutions.
You can download the guide here.
Following the increase of the Same Day ACH dollar limit to $1 million in March 2022, Nacha and the ACH Operators—the Federal Reserve and The Clearing House—have completed the latest phase in the acceleration of ACH payments with the implementation of “Late Night ACH,” according to a Nacha news release.
Implemented in mid-September 2022, the Federal Reserve and The Clearing House now deliver late-night ACH files to all receiving financial institutions in the ACH Network by 11:30 p.m. Eastern Time on business days, accelerating the delivery of ACH payments that otherwise would be received on the next business morning.
The new service enhancement provides additional ACH file distributions to receiving institutions but does not change ACH settlement times or receiving institution processing requirements. Receiving institutions, at their option, may process these files when received to better reflect customer account balances over a full-day cycle or a weekend.
According to the Wall Street Journal, the volume and sophistication of fraud on the Zelle payment network are drawing the attention of lawmakers. JPMorgan Chase, Wells Fargo, and Bank of America Corporation are among the banks in discussions to create a playbook for refunding customers and each other for illegitimate transfers, says the Wall Street Journal. According to the article, “The idea is to boost security and consumer trust in Zelle.”
On Nov. 28, The New York Times reported, “The seven banks that own the payments network Zelle are preparing a major rule change early next year that will require the network’s member banks to compensate customers who fall victim to certain kinds of scams, according to two people familiar with the plans,” reported The Times goes on to say:
The shift would reverse the network’s current policy, which typically sticks customers with the losses on any Zelle transactions that the customers physically initiated themselves — even if they were tricked into sending their cash to a thief. A growing number of scams using Zelle has angered lawmakers and regulators, who have pressured banks to better protect — or indemnify — their customers.
A Twitter Payments System?
As reported by TechCrunch, Elon Musk detailed his vision for Twitter's plan to enter the payments space during a live-streamed meeting with Twitter advertisers. Musk suggested that, in the future, "users would be able to send money to others on the platform, extract their funds to authenticated bank accounts and, later, perhaps, be offered a high-yield money market account to encourage them to move their cash to Twitter."
This follows on the heels of an earlier New York Times article, which stated:
Mr. Musk has often mused about incorporating payments into Twitter. On Wednesday, he said that he envisioned users connecting their online bank accounts to the social media service, with the company moving later into "debit cards, checks and whatnot." Turning Twitter into a payments processor would be a return of sorts for Mr. Musk to his early days in the tech industry. In 1999, he helped found X.com, an online bank that later became PayPal."
Time will tell how this might play out in the payments space. For now, financial institutions should remain watchful as this story unfolds.
Banks to Offer Businesses Early Wage Access Programs
Companies are looking for ways to attract and retain employees and are finding that early wage access is an offering that can help them do so, says PYMNTS. Financial institutions that serve these businesses are adding a range of tools and features to meet the needs of their business clients.
As reported by PYMNTS, “24% of banks intend to offer early wage access program soon, joining the 70% that already do so, according to ‘The Rise of Digital And Early Access Compensation,’ a PYMNTS and Ingo Money collaboration that is the latest addition to the “Money Mobility Tracker® Series.”
The trend toward growing adoption of early wage access by financial institutions is being driven by businesses looking for ways to reduce workforce attrition when three-quarters of employees say they are looking to change jobs, says PYMNTS.
With the end of the year just days away, we want to thank you for choosing NEACH as your strategic partner. We remain committed to serving the needs and interests of our membership in the new year and beyond.
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.