Welcome to the October 2022 Innovating Payments Executive Summary. The Federal Reserve Bank announced it expects its FedNow Service to go live as early as May 2023. In a webcast to a FedNow early adopter workshop in Rosemont, Ill, Fed Vice Chair Lael Brainard called all key stakeholders to devote the resources necessary to support instant payments. The Fed also announced it had launched the FedPayments® Insights Service, a business and analytics tool to help organizations advance their business strategy and day-to-day ACH operations.
In other news, Nacha, the U.S. Faster Payments Council (FPC), and the nation’s Payments Associations announced plans to create the Accredited Faster Payments Professional (AFPP) program, with the first exam set to launch in late 2024 or early 2025. Additionally, The Clearing House announced the release of a white paper that analyzes the application of the Electronic Funds Transfer Act (EFTA) and Regulation E (Reg E) error resolution requirements to financial institutions involved in certain person-to-person (P2P) transactions.
For more on these and other stories, read on.
The Federal Reserve
Fed Calls Stakeholders to Prepare for FedNow
During an early adopter workshop in Rosemont, Ill., Fed Vice Chair Lael Brainard called all key stakeholders to devote the resources necessary to support instant payments. FedNow is expected to go live as early as May 2023.
"Having the capacity to manage money in real-time could help households avoid costly late payment fees or free up working capital for small businesses to finance growth," Brainard said via a webcast to a FedNow early adopter workshop in Rosemont, Ill. “Indeed, during the pandemic, we witnessed how essential rapid access to funds can be, as many households started spending emergency relief payments on the day they were received.”
During this workshop, Brainard also called stakeholders to act now to prepare: "The shift to real-time payment infrastructure requires a focused effort, but the change is inevitable. The time is now for all key stakeholders—financial institutions, core service providers, software companies, and application developers—to devote the resources necessary to support instant payments. This means upgrading back-office processes, evaluating accounting procedures to accommodate a seven-business-day week, arranging liquidity providers, deploying a new customer-facing application, and promoting instant payments for key use cases to customers"
To read Brainard’s comments in full, click here.
Fed Launches Service to Help FIs Track Trends
On Sept. 19, Federal Reserve Financial Services announced it had launched the FedPayments® Insights Service, a business and analytics tool that generates reports on a financial institution’s payments settled through the FedACH Service to help the organization advance its business strategy and day-to-day ACH operations.
“In recent years, ACH transactions have grown in both volume and total value,” said Keith Melton, senior vice president and head of product management, Federal Reserve Financial Services, in the release. “As a result, it’s more important than ever before for financial institutions to analyze their ACH payment trends to help inform operational, risk management and strategic decisions. The FedPayments Insights Service provides a comprehensive, easy-to-access view of an institution’s daily and historical FedACH activity, including government and commercial transactions.”
The service, accessed through the FedLine Web® and FedLine Advantage® Solutions, can track transactions settled through FedACH for individual originators, a single routing number (RTN), or a family of RTNs. The FedPayments Insights Service can generate data and visual reports on payment trends and activity, including volume, reversals, and return rates. Historical data includes two years of detailed information and six years of summary.
To learn more and sign up for the service, visit the FedPayments Insights Service webpage.
Real-Time Payments Tracker
In other news, PYMNTS, in collaboration with The Clearing House, released new faster payments intelligence around how the U.S. is implementing real-time payments. The data contained in the Aug./Sept. PYMNTS Real-Time Payments Tracker covers topics such as fighting misconceptions about real-time payments fraud, new real-time applications, growth for real-time payments, and more.
Inside the Tracker:
- The RTP® Network processed more than 41.2 million transactions valued at $18 billion in 2022. This is more than a threefold increase over Q1 2020, which saw approximately 12.5 million transactions.
- Today, 61% of direct deposit accounts can access the RTP network.
- While just 1.8 billion real-time transactions took place in the U.S. in 2021, real-time transaction volume is expected to reach 8.9 billion in 2026.
- Companies generating between $20 million and $1 billion in sales have been relatively slow to adopt real-time payment technologies, according to a PYMNTS study. Fraud concerns are the primary obstacle that must be overcome to increase adoption.
- Many core banking platforms, including Fiserv, FIS, and Jack Henry, are now connecting customers to the RTP network.
In addition, PYMNTS and The Clearing House issued "Real-Time Payments: How Speed is Changing the Mix of Business Payments,” a report, which included a survey of 100 executives, that delves into the chasm between adoption and usage to understand what’s keeping companies on the sidelines. It demonstrates that while today’s B2B real-time payments remain lower on the adoption scale (only 16% report using it), the potential exists for the use case.
The stage is set for real-time payments to become a competitive differentiator. Financial institutions should begin preparing for what is expected to quickly become table stakes.
Nacha and the FPC
Accredited Faster Payments Professional (AFPP) Program
“On Sept. 29, Nacha, the U.S. Faster Payments Council (FPC) and the nation’s Payments Associations announced a first-of-its-kind alliance to create the Accredited Faster Payments Professional (AFPP) program,” according to a combinednews release. “This partnership demonstrates a cross-industry collaboration to benefit the entire payments community.”
“This cooperation among Nacha, the FPC and the Payments Associations marks a new chapter of teamwork and will provide a single industrywide accreditation where payments professionals can demonstrate their faster payments proficiency,” said Nacha President and CEO Jane Larimer. “The program will ensure consumers and businesses can continue to trust that the professionals handling their payments have demonstrated an expertise in the multitude of payment methods they utilize.
Nacha will administer the AFPP exam using the same methodologies and academic requirements as the current Accredited ACH Profession (AAP) and the Accredited Payments Risk Professional (APRP) exams. Nacha is currently accepting nominations for the AFPP Oversight Panel, which will help create the program policies, the exam, blueprint, and the AFPP Body of Knowledge and Operational Pilot Test.
Nacha expects the first module for the FFP Certificate Program to be available later this year and the first AFPP exam to be provided in late 2024 or early 2025.
New Risk Management for the Era of Credit-Push Forward
Nacha released a report on Sept. 22 on its latest Risk Management Framework, providing a new strategy for industry participants in both the ACH Network as well as other payments systems to address new and persistent frauds that increasingly make use of credit-push payments . . . "
As reported by Nacha, its strategy identifies three themes in payments risk management and areas of focus for new initiatives:
- The most significant fraud threats to bank account holders involve fraud and scams that result in money being sent out of their accounts using credit payments, including ACH credits, wires, cards, and other instant and digital payments.
- The financial institutions that receive these credit payments should actively participate in fraud detection, prevention, and recovery. These institutions are often in the best position to identify potentially fraudulent credit payments sent to accounts at their institution.
- Success in fighting credit-push fraud requires cooperation and information sharing among financial institutions and other stakeholders.
"The fraud landscape is dynamic, so it is important that participants in the payments system understand and adapt to emerging fraud scenarios and develop counterstrategies to help protect their customers and themselves," said Jane Larimer, Nacha President, and CEO, in the release. “We need a new way of thinking about fraud detection, prevention and recovery and a cultural change about fraud information sharing.”
The Risk Management Framework report is available here.
The Clearing House
In other news, the Clearing House announced the release of a white paper that analyzes the application of the Electronic Fund Transfer Act (EFTA) and Regulation E (Reg E) error resolution requirements to financial institutions involved in certain person-to-person (P2P) transactions.
According to the release, the TCH white paper provides additional information and clarity on several issues related to the application of Reg E, including:
- How Intermediated Transfers involve two different financial institutions (FIs) and two separate transactions
- How FIs involved in Intermediated Transfers each have responsibilities when it comes to investigating and resolving errors
- How the scope of those responsibilities varies and the type of error asserted matters
- How the various Transfer Provider operating models differ and how Reg E applies differently depending on the model
- How clarity regarding error resolutions is critical for protecting consumers and for the financial services industry
To access a copy of the white paper, please click here.
For more on these issues and the latest developments in payments, including what the future may hold, join us for The Future of Payments Symposium II on Dec. 1, 2022. This virtual event brings together banking, payments, and fintech professionals to address the evolution of the payments landscape and its impact on financial institutions.
To learn more or to register for the conference, click 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.