As we turn our attention to this month’s headlines and developments, President Joe Biden, inaugurated into office January 20, 2021, is taking swift and decisive action in moving his proposed $1.9 trillion coronavirus relief plan forward. Included in the legislation is a third round of economic impact payments, in the amount of $1,400. Biden told House Democrats that he would not budge from the $1,400 payments, but he was open to sending the payments to a smaller, more targeted group of Americans.
Meanwhile, the IRS recently announced it will reissue 2.8 million Economic Impact Payments (EIP) by Direct Deposit with the remainder going by check and debit cards to eligible taxpayers. According to the IRS website, it will reissue payments for taxpayers who did not receive EIPs because the bank accounts identified in its records were closed.
Read on for more news about COVID’s impact on financial institutions and new developments in payments.
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February 2021 At-A-Glance
This month’s top news includes:
- COVID’s Impact: Retail banking is experiencing a paradigm shift due to COVID.
- Emerging Payments: FDIC selects 14 companies in modernizing bank financial reporting; credit unions using new tools to drive member engagement; instant payments emerge as key factor for winning customer loyalty.
- New Role of Operations Workgroup: The Workgroup tackles emerging operational challenges; current projects and next meeting.
- Faster Payments Strategy: FPC releases “The State of Play in U.S. Faster Payments” report; Nacha updates on Q4 2020 volume.
- RTP® and FedNow(SM): The Fed announces FedNow Service launch in 2023 and names participants in its new pilot program; Wells River Bank joins RTP Network.
- Other News: FTC warns of scammers impersonating the agency; NEACH provides an overview of emerging issues in the most recent Cyber Watch column.
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COVID’S IMPACT
PYMNTS, in collaboration with SundaySky, recently surveyed 2,209 consumers in an effort to map the shift in how consumers are engaging with their financial institutions as a result of the COVID crisis.
The recently released results of the survey, “Retail Banking’s Paradigm Shift,” revealed the pandemic has made getting answers to complicated questions more of a challenge as visiting physical branches is no longer a preferred option. Consequently, consumers are increasingly turning to digital alternatives, such mobile apps, online chat, and rich media content.
The report concludes:
Our research shows that FIs that support digital tools that mimic real-life interactions are actually increasing their brands’ appeal. Consumers increasing use of options, such as mobile apps, social media, and personally relevant video means that FIs will continue to offer these digital capabilities to enhance their brand stickiness even after the pandemic ends.
You can download the full report here.
In other news, “The pandemic has been driving consumer payment choices and purchasing behaviors, influencing how customers transact, which payments they use, and why they use them, according to a new survey,” reports PYMNTS. “PSCU’s recent 2020 Eye on Payments, which polled more than 1,500 CU members and other FI customers in the United States, found 70 percent of respondents decide how to pay for a product or service based on which safe options are available at the point of sale.”
As a result of the pandemic, industry reports point to contactless payment innovation underway at the nation’s credit unions as consumers increasingly shun cash and physical cards to lower the risk of infection. In addition, findings show credit unions are also accelerating the move toward artificial intelligence and cloud-based solutions to drive member engagement.
For more on these and other stories, download PYMNTS just released January 2021 Credit Union Tracker®.
EMERGING PAYMENTS
Mastercard announced January 26, 2021, that it is applying the latest quantum-resistant technologies to develop the next generation of contactless payments with its new Enhanced Contactless (Ecos) technology.
According to the company’s news release, with Ecos, consumers, merchants and financial institutions will benefit from:
Enhanced Convenience – Over time, the company envisions that the in-store shopping experience will become increasingly contactless-only. These new specifications will help ensure any device truly can be a payment device, while eliminating the need for a backup swipe or dip of a card.
Enhanced Trust – Ecos leverages new, quantum-resistant technology to deliver next-generation algorithms and cryptographic key strengths while keeping the contactless interaction under half a second.
Enhanced Privacy – The new specifications deliver advanced protection when account information is shared between the card or digital wallet and the checkout terminal. Ecos builds on the increased requirements to support various privacy regulations.
In other emerging payments news, a new study shows an increase in demand for instant disbursement payments. “The Disbursements Satisfaction Playbook: Leveraging Instant Payment Access To Drive Engagement,” a PYMNTS and Ingo Money collaboration, analyzes the survey responses of more than 5,000 consumers and 1,000 business owners to determine how they make disbursements and detail how offering instant funds access can be critical to strengthening long-term client and consumers loyalty.
As reported by PYMNTS:
“Large payors appear to have recognized the significance of providing instant disbursements for their clients and consumers, with PYMNTS research revealing that more than 81 percent believe that the ability to offer instant payments is crucial to their long-term client relationships. Sixty-eight percent of payors are now even willing to pay a fixed fee to offer instant disbursements to consumers and business clients — removing the most significant barrier to increased consumer and microbusiness adoption.”
To gain additional insights into how instant disbursements are transforming the way payors use payment choice to build long-term customer relationship, download the report.
NEW ROLE OF OPERATIONS WORKGROUP
The New Role of Operations Workgroup met January 29, 2021. The group focused its attention on key issues shaping operations today, including challenges facing operations. The group will be developing several broad topics, including:
- Delivery/channels and technology
- Evaluating and interacting with vendors
- Customer segmentation and demographics
- Staffing and talent
- Operations as part of overall strategy
- COVID challenges
- Fraud
- Collaboration
The group continues to refine its definition, “Defining What Operations is Today,” and will meet again on February 25, 2021.
Watch for our upcoming article, featuring highlights from our January meeting, on the Innovating Payments website.
FASTER PAYMENTS STRATEGY
The Faster Payments Council (FPC) recently released “The State of Play in U.S. Faster Payments Industry,” which provides an update on the market for instant and immediate payment services in the United States, with a focus on the various underlying payment networks.
According to the FPC, “The report breaks down features of the networks, from various types of transaction processed (credits vs. debits) to the fraud and risk control measures in place for each, and provides a true illustration and understanding of how funds move on the networks.” The report also highlights the ways in which faster payments are enabling a variety of use cases.
If your financial institution is considering implementing faster payments, FPC’s “The State of Play in the U.S. Faster Payments Industry,” might be a good place to start.
To view this resource in its entirety, click here.
In other news, strong growth continued on the ACH Network in the final quarter of 2020, with 7 billion payments made, an increase of nearly 9% from a year earlier. Driven in part by the use of Same Day ACH, the results show the dramatic impact of the pandemic on the use of payments by Americans, businesses and government agencies compared to a year ago, before the pandemic had significantly impacted the U.S. economy.
As reported in the release:
Internet-initiated consumer ACH payments for bills and other account transfers grew by 15.2% to more than 2 billion. Person-to-person (P2P) payments completed by ACH grew by 44% to 62 million.
Business-to-business (B2B) payments by ACH for vendor and supply chain payments rose almost 15% from the fourth quarter of 2019 to 1.2 billion.
Same Day ACH had 96.7 million payments moving $139.2 billion in the fourth quarter. These represent growth rates of 35.7% and 101.2%, respectively, compared to the fourth quarter of 2019, the last full quarter before the increase in the Same Day ACH dollar limit. The limit was raised to $100,000 per payment in March 2020.
Click here to read the release in its entirety. An infographic showing fourth quarter results is also available for download as a PDF.
With faster payments on the rise, it is more important now than ever to develop a robust payments strategy. We created a series on developing a payments strategy to inform the process, and we’re here to help.
To access our series of articles on this topic, visit our Innovating Payments website, sign in, and search under “payments strategy.”
Also, keep an eye out for our on-demand Building a Faster Payments Playbook series which should be available to purchase later this month.
RTP® & FEDNOW(SM)
FEDNOW
The Federal Reserve announced an update to its industrywide launch timing for the FedNow Service to 2023. The announcement narrows the delivery timeframe by a full year, updating the previous estimate of industrywide availability of 2023 or 2024.
This comes on the heels of the Fed’s January 25, 2021, announcement, indicating that more than 110 organizations are participating in the pilot program for the FedNow Service. According to the news release, “The program will support development, testing and adoption of the FedNow Service, as well as encourage development of services and use cases that leverage FedNow functionality. A key objective in selecting participants for the pilot was to ensure diverse representation across financial institutions and service providers, connection types, settlement arrangements and experience levels.”
According to a statement released by the Fed, “General availability of the FedNow Service will occur after extensive testing by more than 110 participants in the FedNow Pilot Program to ensure the service is market-ready.”
RTP
The Clearing House recently reported that Wells River Savings Bank, a community bank in Vermont, announced that it has committed to brining real-time payments capabilities to its customers through the RTP® network. According to TCH, “Wells River will gain access to the RTP network through SHAZAM, Inc.”
To learn more, click here.
In other news, real-time networks are taking new steps to fight fraud in 2021. Done in collaboration with The Clearing House, PYMNTS January 2021 “Real-Time Payments Tracker®” takes a close look at the fraud-fighting needs of real-time rails in a post-pandemic world fixated on instant payments.
As reported by the “Real-Time Payments Tracker:”
“Real-time payments are becoming more and more popular among consumers and businesses alike, but some FIs are finding it challenging to safeguard such systems. These struggles are leading many to examine cutting-edge tools that can help them better protect these transactions from fraud.”
Download the “Real-Time Payments Tracker,” done in collaboration with The Clearing House, to learn more.
To better prepare to address the future of real-time payments, take advantage of NEACH’s Building Blocks of Faster Payments series or Real Time Payments 101 and 201 to set the foundation for your institution.
OTHER NEWS
Federal Trade Commission Scam
“The Federal Trade Commission just announced that scammers are attempting to impersonate them, complete with a fake website designed to look like the Federal Trade Commission,” says Rayleen Pirnie. Director of Risk and Fraud for NEACH.
"The site says you can ‘instantly receive’ a cash payment by clicking on some links and giving the site your personal data and bank account or electronic wallet information."
People are already reportedly losing money to the scam and providing their identity to the bogus site.
You can read the full consumer alert on FTC Website.
CyberWatch Highlights
In the our most recent CyberWatch post, we continue to explore what the hacks and breaches of 2020 were, read about threats to intelligence by the Chinese government, attacks and vulnerabilities taking advantage of Microsoft 365, and read about malware and DDoS attacks occurring in the last couple of months of 2020. In our ransomware section, we explore the future of ransomware attacks and dive deeper into Egregor and Ryuk ransomware profiles.
To read our CyberWatch column in its entirety, click here.
As always, we welcome your thoughts on the important topic of cybersecurity and encourage you to share this information with your colleagues.
NEACH YOUR TRUSTED RESOURCE IN PAYMENTS
For more on what’s happening in the world of innovating payments, stop by our Innovating Payments website.
As always, consider NEACH your trusted resource in payments. We are here to support you. For questions, call our payments hotline at 855-NEACHQA.
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AUTHOR: Mark J. Dixon, AAP, APRP, NCP
Director, Payments Innovation
As the Director of Payments Innovation for NEACH, Mark focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Mark to read more of his blogs, articles, and posts.
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