Cryptocurrency and talk of a central bank digital currency (CBDC) continue to make headlines. On Wednesday, March 9, US President Joe Biden signed an executive order directing agencies across the government to study cryptocurrencies and a central bank digital currency (CBDC). Meanwhile, in a speech at the US Monetary Policy Forum in New York on February 18, Governor Lael Brainard of the Federal Reserve System urged her listeners to prepare for the payments system of the future, saying, “The Federal Reserve has been thinking critically about whether there is a role for a potential US central bank digital currency (CBDC)."
Also making headlines this month: The Federal Trade Commission reported fraud losses increased by more than 70 percent over 2020 to more than $5.8 billion, according to the FTC. Real-time payments continue to take center stage, with a new report from consulting firm Cornerstone Advisors, “What’s Going on in Banking in 2022,” stating three in 10 banks and a quarter of credit unions plan to implement real-time payments in 2022. And small businesses show an overwhelming preference for instant payments, providing new revenue-producing opportunities for financial institutions.
For more on these and other stories, read on.
President Joe Biden, on March 9, signed an executive order (EO) on government oversight of cryptocurrency that urges the Federal Reserve to explore whether the central bank should jump in and create its digital currency, according to AP News.
According to the article:
Treasury Secretary Janet Yellen said the effort would “promote a fairer, more inclusive, and more efficient financial system” while countering illicit finance and preventing risks to financial stability and national security.
The Biden administration views the explosive popularity of cryptocurrency as an opportunity to examine the risks and benefits of digital assets, said a senior administration official who previewed the order Tuesday on the condition of anonymity, terms set by the White House.
The EO includes several directives to federal departments and agencies. According to the March 10 issue of ICBA News Watch Today, it directs:
- The Treasury Department and other agencies to develop policy recommendations related to digital asset oversight, illicit finance, and equitable access.
- The Financial Stability Oversight Council to identify potential systemic risks.
- The Federal Reserve to continue researching a potential US CBDC.
- The attorney general to work with Treasury and the Fed to determine whether legislation is necessary to establish a CBDC.
- The Commerce Department to develop a framework to drive US competitiveness.
The EO comes as lawmakers and administration officials are voicing concern that Russia may be using cryptocurrency to avoid the impact of sanctions imposed on its banks, oligarchs, and oil industry due to the invasion of Ukraine, US News reports.
As this story unfolds, watch for updates on NEACH’s Innovating Payments and Members Corner websites.
The Federal Reserve
Central Bank Digital Currency
In a speech at the US Monetary Policy Forum in New York on February 18, Governor Lael Brainard of the Federal Reserve System urged her listeners to prepare for the payments system of the future:
The Federal Reserve needs to be preparing for the payment landscape of the future even as we continue to make improvements to meet today's needs. In light of the rapid digitalization of the financial system, the Federal Reserve has been thinking critically about whether there is a role for a potential US central bank digital currency (CBDC) in the digital payment landscape of the future and about its potential properties, costs, and benefits.
“The financial system is not standing still, and neither can we,” she concludes.
You can read Governor Brainard’s remarks in their entirety here.
The Federal Trade Commission
The Federal Trade Commission (FTC) reported that new data shows FTC received 2.8 million fraud reports from consumers in 2021. According to the FTC, reported fraud losses increased by more than 70 percent over 2020 to more than $5.8 billion.
According to the release:
The FTC received fraud reports from more than 2.8 million consumers last year, with the most commonly reported category once again being imposter scams, followed by online shopping scams. Prizes, sweepstakes, lotteries; internet services; and business and job opportunities rounded out the top five fraud categories.
Of the losses reported by consumers, more than $2.3 billion of losses reported last year were due to imposter scams—up from $1.2 billion in 2020, while online shopping accounted for about $392 million in reported losses from consumers—up from $246 million in 2020.
For a full breakdown of fraud reports received in 2021, visit ftc.gov/exploredata.
What’s Going on in Banking in 2022
A new report from consulting firm Cornerstone Advisors, “What’s Going on in Banking in 2022,” predicts real-time payments will take center stage this year. According to the report:
Three in 10 banks and a quarter of credit unions plan to implement real-time payments in 2022. Many institutions planning to launch in 2022 haven't determined their strategy yet. Still, they are opening the door for vendors with real-time payment solutions and putting pressure on The Clearing House to accelerate new client implementations in 2022 before FedNow’s planned launch in 2023.
But when it comes to how financial institutions plan to go about deploying RTP, many don't know. According to the report, thirty-seven percent of banks and 42 percent of credit unions said they hadn't determined their RTP strategy. And about a quarter of banks and one in five credit unions intend to wait for FedNow to deploy before rolling out real-time payments.
Citizens' Annual Payments and Treasury Survey
Citizens’ annual payments and treasury survey results also underscore the importance of real-time payments, with 85 percent of business leaders saying the most important factor when choosing a banking partner is whether the financial institution offers real-time payments (RTP) capabilities. For the first time, the ability to offer RTP topped the list of requirements for businesses and was considered more important than the ability to provide the lowest-cost financing.
The survey also makes this important point:
Business leaders expect banks to continue to upgrade technology, with 83 percent of respondents saying they expect their bank to leverage the latest technological tools to help their business compete. And 83 percent expect their bank to provide their business with more self-service capabilities where needed.
These survey results underscore the importance of financial institutions remaining aware of shifting customer preferences and updating their current product offerings and services.
SMBs Prefer Instant Payments
Small to medium-sized businesses (SMBs) also show a strong preference for instant payments, according to PYMNTS.com Disbursements Tracker, which revealed:
- 75 percent of SMBs are more likely to do business with buyers that offer access to free instant payments
- 54 percent of SMBs would be willing to pay added fees to receive instant payments for invoices
- 66 percent of consumers are more likely to continue doing business with organizations that offer free instant payments
Instant payments could be an effective tool for attracting and retaining SMBs while offering revenue-enhancing opportunities for financial institutions.
GoDaddy Mobile App QR Code
In other news, GoDaddy is offering a way to streamline payments for small businesses by using a QR code. Small business owners can accept payment without a terminal or card reader using a unique one-time QR code generated on their smartphone via the free GoDaddy Mobile App for a smooth, contactless, and quick sale said the company’s news release.
According to the release:
Each QR code is personalized, and for enhanced security, the code automatically expires once the transaction is completed. And with heightened concerns around in-person shopping due to the pandemic, this latest feature of GoDaddy Payments offers a completely contactless way to pay, so more than credit card information stays protected.
Although far from widespread, QR payments are a trend that financial institutions should watch.
NEACH Your Strategic Partner
With today’s rapid pace of change, staying on top of payments trends can prove a challenge. That’s why NEACH places such a high value on providing educational and network opportunities for its members and the industry.
On March 16-17, the Massachusetts Bankers Association (MBA) and New England Automated Clearing House (NEACH) will again collaborate on the Payments School. A detailed agenda for this 1.5-day school can be viewed by clicking here. The lead facilitator for the school is Elyssa Morgan, Director of Membership at NEACH. You can download the registration form here.
And don’t miss this year's in-person Payments Management Conference, May 16-17, at the Foxwoods Resort Casino. For those unable to attend the in-person conference, NEACH is offering a virtual conference experience on June 30, 2022, from 9:00 AM – 3:50 PM, followed by a reception from 4:00 – 5:00 PM.
You can register for this year’s in-person and virtual Payments Management Conference here.
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.