Welcome to the May issue of the Innovating Payments Executive Summary. In our top story, the Federal Reserve is requesting comments on its proposal to expand services to include weekends and holidays. According to studies released by the Federal Reserve, U.S. businesses and consumers are rapidly adopting digital, faster, and instant payments. Federal bank regulatory agencies released a guide on May 3 to support community banks in managing risks presented by third-party relationships.
This month, the Faster Payments Council (FPC) published its latest report, Navigating Instant Recurring Payments: Consumer, Business, and Financial Institution Perspectives. In other news, Nacha announced a 47% increase in Same-Day ACH volume, leading the ACH Network into 2024 with 8.2 billion payments in the first quarter.
Read on to learn more.
Federal Reserve
Fed Requests Comment on Proposal to Expand Operating Days to Include Weekends and Holidays
According to a news release, on May 3, the Federal Reserve Board requested comment on a proposal to expand the operating days of the Federal Reserve Banks' two large-value payments services to include weekends and holidays so that they would operate every day of the year.
The Fedwire® Funds Service and the National Settlement Service, or NSS, operate Monday through Friday, excluding holidays. Under the proposal, both services would operate every day of the year. The operating hours each day would remain the same, with the Fedwire Funds Service open 22 hours per day and the NSS open 21.5 hours per day. Participation by financial institutions in using the expanded operating days would be voluntary.
Expanding operating days could improve the credit risk and operational efficiency of systemically essential financial market utilities and private-sector retail payment arrangements, spur innovation in new or enhanced private-sector payment solutions, and support more efficient cross-border payments flows. However, it would also require operational and technical changes imposing costs. The proposal seeks feedback on all aspects, including benefits, potential costs, and risks.
Comments on the proposal will be accepted up to 60 days after publication in the Federal Register.
To learn more, download the Board memo (PDF) and Federal Register notice: Expansion of Fedwire® Funds Service and National Settlement Service Operating Hours (PDF)
Federal Reserve Surveys: U.S. Businesses, Consumers Increasingly Adopt Faster and Instant Payments Services
According to studies released by Federal Reserve Financial Services, U.S. businesses and consumers are rapidly adopting digital, faster, and instant payment services, a May 6 news release reported. Digital wallet use saw robust growth in 2023—efficiency-focused businesses increased their use by 31% over the prior year, and convenience-minded consumers experienced a 32% increase.
“The growing demand for faster and instant payment services suggests that tools like FedNow® Service will continue to play a key role in helping financial institutions meet their customer's needs,” Mary Gould, Chief Payments Executive for Federal Reserve Financial Services, said in the release. “The strong growth we’re seeing in the FedNow Service, which has grown to over 700 participants since launching last summer, shows how financial institutions are stepping forward to meet this change in customer expectations.”
Complete reports of the corporate and consumer surveys can be found here: Business Research Brief (Off-site PDF) and Consumer Research Brief (Off-site PDF).
Agencies Issue Guide to Assist Community Banks to Develop and Implement Third-Party Risk Management Practices
Federal bank regulatory agencies released a guide on May 3 to support community banks in managing risks presented by third-party relationships.
Community banks engage with third parties to help compete in and respond to an evolving financial services landscape. These relationships present varied risks that community banks are expected to appropriately identify, assess, monitor, and control to ensure that their activities are performed safely, soundly, and in compliance with applicable laws and regulations. The laws and regulations include, but are not limited to, those designed to protect consumers and those addressing financial crimes.
The guide offers potential considerations, resources, and examples through each stage of the third-party relationship and may be a helpful resource for community banks. While the guide illustrates the principles discussed in the third-party risk management guidance issued by the agencies in June 2023, it is not a substitute for that guidance.
Click here to learn more.
New Industry Reports on Faster Payments
U.S. Faster Payments Council Unveils Comprehensive Report on Instant Recurring Payments
On May 7, the U.S. Faster Payments Council (FPC), a membership organization devoted to advancing safe, easy-to-use, faster payments in the United States, published its latest report titled Navigating Instant Recurring Payments: Consumer, Business, and Financial Institution Perspectives, noted a news release. This comprehensive needs assessment offers strategic insights into implementing instant recurring payments, focusing on the unique perspectives of consumers, businesses, and financial institutions.
The new report delves into critical components for successfully deploying instant recurring payments. It highlights the importance of features such as Request for Payment (RfP) and standing approval, providing a robust foundation for seamless and secure transactions in the dynamic landscape of instant payments.
Click here to read the report in its entirety.
U.S. Inches Forward on Real-Time Payments: Report
“Real-time payments are still in their infancy in the U.S., accounting for only a 1.5% share of the total payments volume in 2023,” ACI Worldwide said in a new report, according to Payments Dive. The report took a deep dive into the five of the most successful real-time payments markets worldwide, analyzing the driving factors and use cases enabling those countries to develop real-time payments ecosystems that are transforming businesses and consumers’ lives.
“Real-time payments—and especially cross-border payments—are the future. They remove payments friction, provide greater liquidity in the financial system, and ultimately drive economic growth and financial inclusion,” said Debbie Guerra, Chief Product Officer, ACI Worldwide, in a related news release. “Banks should consider whether they are truly maximizing the real-time rails in their market, and whether limiting their commitment to the minimum also means limiting their potential share of the future of payments.”
All essential facts and figures can be found in ACI Worldwide’s Prime Time for Real-Time 2024 Infographic.
Nacha
Same Day ACH and B2B Propel ACH Network Growth in the First Quarter
According to Nacha, a 47% increase in Same-Day ACH volume led the ACH Network into 2024 with 8.2 billion payments in the first quarter.
“In the first quarter, 273.7 million Same Day ACH payments were made, with a value of $719 billion, up 27.2% from a year earlier,” a Nacha news release announced. “The Same Day ACH volume in March 2024 was 95.6 million, averaging more than 4.5 million payments per day, both all-time monthly highs since Same Day ACH launched.”
“As strong adoption of Same Day ACH continues, Nacha will work with stakeholders across the payments community to keep this faster payment method moving forward,” said Jane Larimer, Nacha President and CEO in the release.
Business-to-business (B2B) payment growth also remained strong, with 1.7 billion payments in the first quarter, a 10.8% increase.
To see all of Nacha’s Q1 statistics, download this infographic.
Ongoing Education
As the industry continues to evolve and instant and real-time payments grow in adoption, NEACH U can provide teams with the tools they need to succeed in the dynamic landscape. Whether you're looking to build proficiency in payment-related functions, implement strategic changes in your organization, develop leadership skills, or learn how to lead and grow payments teams for the future, our programs are designed to provide the tools and knowledge needed to help maximize your impact.
NEACH U also offers eleven certificate programs spanning various facets of the payments industry. You’ll learn from the finest experts in the field, who impart their invaluable wisdom, experience, and network. Your journey doesn’t end in the classroom; it forges a lifelong connection to a community of payments professionals that makes your experience exceptional. Embrace an extensive array of subjects across all program levels and commence your journey towards obtaining your NEACH U certificate.
Check out NEACH U today.
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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.
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