Welcome to the May 2022 issues of NEACH’s Innovating Payments Executive Summary. In this month’s issue, the Federal Reserve announced it launched the initial testing phase of its FedNowSM Pilot Program and began onboarding pilot participants onto the FedNow Service, with a few organizations having now successfully delivered test messages over the pilot platform.
In other news, Nacha President and CEO Jane Larimer announced that Nacha and the Faster Payments Council are partnering to provide the Faster Payments Professionals (FPP) certificate program and Payment Associations, like NEACH, will be delivering relevant training. Also in this month’s issue, The Clearing House announced that it is making tokenization for deposit and checking account information available to financial institutions and third-party service providers. And PayPal announced the launch of crypto on Venmo, a new way for Venmo’s more than 70 million customers to buy, hold and sell cryptocurrency directly within the Venmo app.
For more on these and other headlines, read on.
The Federal Reserve
FedNow℠ Service Pilot Program Achieves Message Delivery Milestone, Welcomes New Participants
The Federal Reserve launched the initial testing phase of its FedNow Pilot Program and began onboarding pilot participants onto the FedNow Service; a few organizations have now successfully delivered test messages over the pilot platform, according to a May 2 news release.
“The FedNow Service pilot participants, including financial institutions of all sizes, processors and correspondents, have been working hard at every step of this journey,” said Nick Stanescu, senior vice president and business executive of the FedNow Service said in the release. “Though much work remains, this progress sets the stage for thousands of financial institutions to be up and running with instant payments in the near future, including those that work with third-party payment providers.”
Among them are several new organizations that recently joined the FedNow Pilot Program, including Square Financial Services, Inc. and Q2 Holdings, Inc. These organizations satisfied pilot criteria surrounding instant payments readiness and expressed a desire to participate in early testing. In total, the FedNow Pilot Program now numbers more than 120 organizations.
New Modules Released for Synthetic Identity Fraud Mitigation Toolkit
The Federal Reserve also published two new modules in its Synthetic Identity Fraud Mitigation Toolkit, the Fed reported in its April Community Pulse newsletter. “This latest release includes resources on differentiating real customers from synthetics using identity validation tools and alternative data, and offers insights on identifying synthetics at different stages of an account relationship.”
"Financial institutions and other organizations want to know how to address the growing threat of synthetic identity fraud," Mike Timoney, Vice President, Secure Payments, Federal Reserve Bank of Boston, said on FedPaymentsImprovement.org. "We developed the toolkit…and are committed to its expansion, based on consistent industry feedback that requested more information on synthetic identity fraud in one place and in consumable formats.”
You can access the Fed’s Synthetic Identity Fraud Mitigation Toolkit here.
During her keynote address at Nacha’s Smarter Faster Payments 2022 conference, Nacha President and CEO Jane Larimer announced that Nacha and the Faster Payments Council are partnering to provide the Faster Payments Professionals (FPP) certificate program.
“The FPP program is something the industry has sought, and we will be delivering, along with exclusive exam preparation by the best in payments accreditation training--our Payments Association members,” Nacha announced in a May 2 mailing. More details to come, along with a press announcement.
You can learn more and sign up to be among the first to earn your FPP certificate here.
The Clearing House
The Clearing House Offers Tokenization to Boost Financial Security
Tokenization for deposit and checking account information, which ensures a customer's banking account and routing numbers never transmit with a payment, will soon be available for financial institutions that utilize the RTP® and EPN networks, according to a joint news release.
Secure Token Exchange (STE) for customer deposit and checking accounts is a new, optional capability currently available for the RTP network that issues tokens for a customer’s bank account and routing numbers. According to the release, these tokens can be used like real account numbers for transactions over the RTP network. EPN is targeting customer deposit and checking account tokenization for later this quarter.
"In today's connected and digital economy, customers increasingly use electronic payments to make purchases, send money to friends and family, and to pay bills," said Jim Aramanda, President and CEO of The Clearing House said in the release. “Tokenization for customer account numbers, which replaces the actual account numbers with a token, is another step financial institutions can take to make their customers’ accounts even more secure when making payments.”
EBA CLEARING, SWIFT and The Clearing House to Deliver Pilot Service for Immediate Cross-Border Payments
A pilot service for immediate cross-border (IXB) payments is being launched by EBA Clearing, SWIFT, and The Clearing House, a joint news release reported. The pilot service will begin at the end of this year, with several participants joining the service in a phased approach. Twenty-four financial institutions, including those preparing to join the pilot, are involved in its design.
The development of this pilot marks another critical step in the IXB initiative launched by the three private-sector, member-owned companies to improve cross-border payments. It follows a proof of concept completed in October 2021, with the contribution of seven financial institutions. The proof of concept demonstrated the ability to synchronize settlement in one instant payment system with settlement in the other and convert real-time messages between both systems.
“The RT1 and RTP® networks are perfectly positioned to deliver a better cross-border experience with a very short time to market,” Russ Waterhouse, Executive Vice President for Product Development and Strategy at The Clearing House, said in the release. ”The trans-Atlantic pilot service will provide valuable input for the development of a fully
RT1 is a payment infrastructure service for the processing of SEPA Instant Credit Transfers (SCT Inst) at a pan-European level. The payment system operates around the clock on any day of the year offered by EBA Clearing House.
Introducing Crypto on Venmo
On April 27, PayPal announced the launch of crypto on Venmo, a new way for Venmo’s more than 70 million customers to buy, hold and sell cryptocurrency directly within the Venmo app, according to a company news release. Beginning its roll-out, crypto on Venmo offers customers a way to start their crypto journey alongside the many ways they already use Venmo to spend and manage their money. According to the 2020 Venmo Customer Behavior Study1, more than 30 percent of Venmo customers have already started purchasing crypto or equities, 20 percent of which began during the pandemic.
"Crypto on Venmo is a new way for the Venmo community to start exploring the world of crypto within the Venmo environment they trust and rely on as a key component of their everyday financial lives," said Darrell Esch, SVP and GM, Venmo. "No matter where you are in your cryptocurrency journey, crypto on Venmo will help our community to learn and explore cryptocurrencies on a trusted platform and directly in the app they know and love. Our goal is to provide our customers with an easy-to-use platform that simplifies the process of buying and selling cryptocurrencies and demystifies some of the common questions and misconceptions that consumers may have."
Crypto on Venmo will be available for all customers directly in the Venmo app within the next few weeks. To learn more, visit www.venmo.com/crypto.
Volante Technologies Annual U.S. Mid-Tier Bank Survey
Volante Technologies, a leader in cloud payments and financial messaging, announced on May 2 the publication of its annual mid-tier payments modernization survey report, available for immediate download here.
The study, based on surveys conducted in the first quarter of 2022, provides insights into the current payments operations and future modernization plans of a representative sample of mid-tier banks and credit unions in the US with assets between $2B USD and $25B USD, according to the release.
Highlights from the survey are below:
- Twenty-seven percent of respondents indicated they are already connected to The Clearing House's RTP® network, nearly double the amount from a year ago. Thirty-seven percent are committed to joining the RTP network within the coming year. Overall, over 50 percent of the mid-tier market should be connected to the RTP network by 2023.
- Thirteen percent of respondents identified themselves as early adopters—an additional 16 percent plan to join within the first year. Many plan to join both the RTP network and FedNow, with mid-tier banks seeing the two networks as complementary rather than either/or propositions.
- More than twice as many respondents said they were planning to adopt cloud-first and Payments as a Service (PaaS) approaches to payments modernization compared to those pursuing traditional legacy system upgrade strategies. Overall, one-fifth of all respondents are actively deploying PaaS solutions.
You can read the full survey results here: Payments Modernization: U.S. Mid-Tier Banks – 2022.
BNY Mellon Drives Reduction in Paper Checks with Carbon-Tracking Tool
As reported by FinExtra, BNY Mellon, one of the largest check processors in the US, is leading efforts to reduce check payments through a series of digital innovations and financial benefits. The article goes on to say:
To support its US clients' transition from paper to electronic transactions, the bank is exploring the use of carbon-tracking tools, which disclose the environmental cost of their paper payments. BNY Mellon is also providing price discounts on certain digital payment solutions and waiving some upfront implementation fees for select clients that commit to the transition.
"Recent innovations in digital payments are shining a brighter light on the inefficiencies of check processing," Carl Slabicki, BNY Mellon's co-head of global payments, told FinExtra. "The business reasons, coupled with the environmental impact, make embracing electronic payments a clear imperative, and we are leading the way with tools and incentives to make that happen.”
Mobile Payments Platform PayByCar Raises $4M
PayByCar, Inc., the mobile payments startup responsible for providing pay-by-text payments at gas stations across Massachusetts, announced on April 26 the completion of a $4 million seed round of funding, according to a company news release.
“Following a string of successes since our 2020 pre-seed round funding, today’s announcement is the beginning of our next chapter in financing expansion of our services across states, and industry verticals like parking, retail, and other sectors,” said Anand Raman, President, and co-founder of PayByCar.
PayByCar allows customers with toll transponders, like E-ZPass or PayByCar windshield stickers, to pay by confirming a text message when they drive into a participating location without opening their wallet or touching the fuel dispenser keypad. You may recall, PayByCar was introduced to NEACH members at our inaugural Innovating Payments Conference in 2018. The process cuts transaction time in half.
NEACH—Your Strategic Partner
Were you unable to attend NEACH’s Payments Management Conference held May 16-17 at the Foxwoods Resort Casino? The same great sessions on Faster Payments; Risk & Fraud; Operations & Quality; and Compliance, along with our keynote and general sessions, will be available on our June 30 one day virtual conference experience.
Our exciting virtual model enables you to enjoy the conference experience from the comfort of your home or office.
To learn more and to register, visit NEACH’s website.
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.