Welcome to this month’s issue of the Innovating Payments Executive Summary. The Department of the Treasury announced on November 1 that the President’s Working Group on Financial Markets (PWG), joined by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), released a report on stablecoins. The potential for the increased use of stablecoins as a means of payments raises a range of concerns related to destabilizing runs, disruptions in the payment system, and concentration of economic power.
Also making headlines this month, the Federal Reserve continues its educational efforts around its FedNow Service, launching new resources to facilitate industry education, preparation, and innovation in support of instant payments, including a new FedNow Explorer website, the Ecosystem Accelerator Group, and Service Provider Showcase.
NEACH is pleased to announce the release of its new white paper, The New Role of Operations: Exploring Channels, Talent, Innovation, Collaboration, and Risk in a Complex World, a joint effort between NEACH and the New Role of Operations Workgroup. In addition, registration is now open for NEACH’s Future of Payments Symposium on December 8-9, 2021. This virtual event explores the intersection of FinTech and financial institution innovation and features a panel discussion highlighting the findings discussed in NEACH's white paper.
Read on for more on these and other stories.
PWG, FDIC, and OCC Releases Stablecoins Report
The President’s Working Group on Financial Markets (PWG), joined by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), released a report on stablecoins, according to a Department of the Treasury press release. Stablecoins are a type of digital asset generally designed to maintain a stable value relative to the U.S. dollar.
The potential for the increased use of stablecoins as a means of payments raises a range of concerns related to the potential for destabilizing runs, disruptions in the payment system, and concentration of economic power, states the release. The PWG report highlights gaps in the authority of regulators to reduce these risks.
To address the risks of payment stablecoins, the agencies recommend that Congress promptly enact legislation to ensure that payment stablecoins and payment stablecoin arrangements are subject to a federal framework on a consistent and comprehensive basis.
You can read the release in its entirety here.
You can view the PWG's here. And you can view a factsheet on the PWG report here.
The Federal Reserve
FedNow Releases New Resources
The Federal Reserve launched new tools and resources for the U.S. payments industry to facilitate education, preparation and ecosystem innovation in support of instant payments, according to its October 20 news release.
"End users have accelerated their use of digital payments, including instant payments," Shonda Clay, the Federal Reserve's chief of customer and industry engagement, was quoted as saying in the release. "The Federal Reserve is offering new tools to help payments stakeholders better understand and address this market, including providing instant payments education and helping them prepare to adopt the FedNowSM Service for instant payments when it is launched in 2023.”
According to the release, these tools include:
- The FedNow Explorer website, an experiential platform designed to educate and engage financial institutions and service providers with curated content and tools to support their instant payments journey.
- The Ecosystem Accelerator Group, a new user group within the FedNow Community that will provide stakeholders and others an opportunity to influence the FedNow Service design and release priorities, participate in programs designed for the needs of solution developers and providers, and more.
- A new Service Provider Showcase to support end-to-end development of the instant payments ecosystem and FedNow Service implementation. Groups can submit their information and solutions for the showcase later this year for exposure on the FedNow Explorer website in early 2022.
The Clearing House
Meanwhile, EBA CLEARING, SWIFT, and The Clearing House (TCH) have joined forces to make cross-border payments as seamless as the fastest domestic payment options.
The three private-sector, member-owned companies have completed a proof of concept as part of a new initiative, Immediate Cross-Border Payments (IXB), demonstrating the ability to synchronize settlement in one instant payment system with settlement in the other and convert real-time messages between both systems, says the release. The concept could be expanded to additional currencies and is also replicable for more liquidity-efficient high-value payments.
"By leveraging the RTP network in the United States and RT1 in Europe, along with ISO 200022 message formats, IXB demonstrates that a faster cross-border payments capability is possible and can be delivered using existing technology,” Russ Waterhouse, Executive Vice President for Product Development and Strategy at The Clearing House said in the release. “By utilizing existing faster payments systems, financial institutions can leverage existing processes, protocols and technology to make the user experience seamless across payment types, whether domestic or cross border.”
EBA CLEARING, SWIFT, and TCH are planning to engage in the next steps towards developing IXB.
ACH Network volume is up 7.7% in the third quarter, and solid B2B growth continues as healthcare claims pass the 100M mark, reported Nacha in its October 19 press release.
As it has throughout the pandemic, B2B volume continued its strong growth with 1.4 billion B2B payments, an increase of 18.7% from the same time in 2020.
Same Day ACH volume also continued to climb with 142.8 million payments valued at $236 billion in the third quarter, increasing 52.1% and 90.4%, respectively. Same-day B2B payment and dollar volumes also thrived, rising by nearly 120% and 160%, respectively, compared to the same quarter in 2020.
For a quick, at-a-glance look at the ACH Network’s Q3 volume, you can download an infographic here.
Zelle Q3 Volume
On November 3, Early Warning Services, LLC, the network operator behind Zelle®, announced its Q3 2021 transaction results highlighted by year-over-year increases across Zelle® Small Business and Disbursements with Zelle®. Overall, the network processed $127 billion on 466 million transactions in Q3 2021. Year-over-year sent payment values increased by 51%, while payment transactions increased by 44%.
Consumers are increasingly turning to Zelle to send and receive payments with businesses, according to the company’s November 3 news release. Zelle®Small Business continues to be a fast-growth area in the Zelle Network®, with more than $11 billion received by small businesses in Q3. In addition, small businesses sent $17 billion using Zelle® to pay for necessary operational expenses such as payroll, bills, and rent.
Disbursements is an ongoing growth area as well, with more than 500 organizations, companies, and government entities turning to Zelle® in Q3 to distribute rebates, refunds, payroll, and other payouts to consumers.
Zelle and Fiserv Launch Program to Bring Real-Time P2P to MDI
In other news, Zelle and Fiserv launched a program to bring real-time P2P payments to minority depository institutions. The two organizations are each offering a rebate to qualifying minority depository institutions (MDIs) that sign up to offer Zelle®, stated an October 21 news release issued by Early Warning Services, LLC.
"MDIs play a crucial role for minority and underserved communities, including both consumers and small businesses," Lou Anne Alexander, Chief Product Officer at Early Warning, said in the release. "By partnering with Fiserv, we make it even easier for these financial institutions to access the Zelle Network®, giving their customers additional tools to help meet their financial goals."
Now through June 30, 2022, eligible MDIs can sign and submit their participant agreement to receive special rebates.
NEACH White Paper
NEACH is pleased to announce the release of its new white paper, The New Role of Operations: Exploring Channels, Talent, Innovation, Collaboration, and Risk in a Complex World, available on neach.org.
This white paper, co-authored by NEACH and The New Role of Operations Workgroup, addresses the disruption of COVID-19 on operations by defining the new role of operations, identifying the challenges facing operations today, highlighting new opportunities in operations, and concluding with specific actions financial institutions may want to consider as they navigate the “new normal.”
Throughout the white paper, you will also find short case studies, submitted by members of the New Role of Operations Workgroup, that highlight how individual financial institutions successfully met operational challenges by implementing strategic and innovative solutions.
By combining cutting-edge technology with strategic human resources and collaboration across the organization, operations can help position financial institutions for success now and into the future.
The Future of Payments Symposium
Explore the intersection of FinTech and financial institution innovation at NEACH’s Future of Payments Symposium, December 8-9, 2021. This virtual event will feature speakers from both worlds to discuss defining and refining payments in a COVID-impacted world.
The event will also feature presentations from NEACH’s New Role of Operations Workgroup, including a closer look at its recently released white paper, The New Role of Operations: Exploring Channels, Talent, Innovation, Collaboration, and Risk in a Complex World.
Sessions will address the questions:
- How can I, as a payments operations professional, prepare for the future of payments?
- How can I, as a strategic leader, plan for the future of payments in my organization?
For this virtual event, purchase one registration and register four additional colleagues at no cost.
Click here to register today.
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.