COVID-19 continues to reshape our industry and consumer banking and payments behaviors. A recent FIS survey underscores this point, revealing that more than 45 percent of banked respondents stated they have changed how they interact with their bank since the outbreak of the pandemic. The implications for financial institutions and their customers are profound. As our industry starts to define the new normal, updates on real-time payments take center stage, with the Federal Reserve announcing FedNow(SM) features and functionality, and The Clearing House revealing that several new financial institutions have joined the RTP® network. Updates on the Faster Payments Council, Nacha's Payments Innovation Alliance meeting, and more, highlight other industry shifts.
Read on to learn more.
The Federal Reserve
Fed Announces FedNow Features and Functionality
The Federal Reserve announced Aug. 6 it had reached a milestone in the development of the FedNow Service, unveiling details of the service's features and functionality. "Industry feedback and in-depth analysis, including over 180 comment letters (Off-site) in response to the August 2019 Federal Register notice (Off-site), helped drive the FedNow Service features and design," says frbservices.org.
They also note features included with the initial FedNow launch, such as:
- Use of the ISO® 20022 standard to support interoperability
- Features to support data security and payment integrity, including tools such as transaction value limit and reporting features to help financial institutions combat fraud
- A liquidity-management tool that will allow participants to transfer funds to each other to support the liquidity needs of instant payments
- Features that support flexible adoption, which includes support for service providers and others, as well as an option to enroll as a "receive-only" participant
- Tools that support participants in handling payment inquiries, reconcilements, and certain exceptions, including a request-for-payment option
- And more.
The Fed hopes to offer additional features related to fraud prevention, error resolution, and case management after the launch. Other options for future exploration include support for person-to-person payments that use the alias of the receiver. The Fed also emphasized it will maintain ongoing engagement with the industry, including a pilot program, that will play a role in its implementation.
To learn more, read the Board's Federal Register notice, which includes a full description of the FedNow Service, here.
Fed Provides an Update on Digital Currencies
In other news, Governor Lael Brainard at the Federal Reserve Board and Federal Reserve Bank of San Francisco's Innovation Office Hours, San Francisco, California, provided an update on digital currencies, stating:
"Given the dollar's important role, it is essential that the Federal Reserve remain on the frontier of research and policy development regarding CBDCs (Central Bank Digital Currency). As part of this research, central banks are exploring the potential of innovative technologies to offer a digital equivalent of cash…More broadly, the Federal Reserve looks forward to increased international engagement on matters related to innovation and technological change that impact central banks and those we serve."
You can read Gov. Brainard's comments in their entirety here.
The Clearing House
As interest in real-time payments climbs, The Clearing House's RTP® Network is seeing a surge of new financial institution participants.
The Clearing House announced Aug. 5, 2020 that Bankers' Bank, a correspondent bank that specializes in providing banking products to community banks, is now live with its Funding Agent solution and is providing funding and liquidity management services for IncredibleBank℠ on the RTP® network developed by The Clearing House.
This follows closely on the heels of a July 29, 2020, release, reporting that Jack Henry & Associates, Inc.®, continues to scale its RTP network through its JHA PayCenter™ with five banks joining the network on the same day:
- Dogwood State Bank, Raleigh, NC
- First Fidelity Bank, Oklahoma City, OK
- National Bank of Texas, Fort Worth, TX
- Royal Bank, Elroy, WI
- Signature Bank, Rosemont, IL
PYMNTS.com reported, "A new survey from Citizens Bank says businesses are jumping into the real-time payments opportunity. According to the financial institution's report released this week, only 9 percent of the 252 corporate professionals surveyed said they did not have plans to implement the new RTP payment rail, a finding that Citizens Head of Product Solutions Matt Richardson said was a positive sign."
The Faster Payments Council
The U.S. Faster Payments Council announced Aug. 17, 2020, its inaugural FPC Board Advisory Group, a standing body authorized by the FPC Board of Directors. Members of the new Board Advisory Group include Jane Larimer, Nacha; Rusiru Gunasena, Jack Henry; Judy Nguyen, American Express; and Michael Sklow, Goldman Sachs, among other payments heavy hitters.
According to the release, "The Board Advisory Group will advise the FPC Board of Directors and FPC Staff by providing additional perspectives outside those represented on the Board and assisting the FPC in capitalizing on and responding to trends in the faster payments market."
In other news, Nacha's Payments Innovation Alliance Meeting met virtually Aug. 13 to discuss COVID-19's impact on electronic payments and innovation. The meeting included speakers from the Federal Reserve, EPN, the Clearing House, Nacha, American Bankers Association, VISA, and Paypal, along with other industry stakeholders.
NEACH staffer Kathy Shea, director of education, participated in the meeting. She shared her experience on NEACH's Members Corner open forum.
Shea noted the focus on the effect of the pandemic on payments with increases in:
- The number of first-time online banking customers
- Ecommerce and other alternative payment channels
- Online account opening
- The use of prepaid cards
- Contactless transactions
"All were prompted by the lack of in-person branch activity, the reluctance of customers to leave home or use cash, an increase in demand for digital payment opportunities, a changing shopping experience -- all ways to conduct financial transactions as safely as possible," says Shea. "These are prompting an acceleration in innovation to ease the transition to the new 'normal.'"
Read Shea's full comments in Members Corner.
And don't forget to read our monthly Cyber Watch posts. These posts provide our members with important industry updates related to cyber-security topics.
This month's Cyber Watch post includes news about the continued attacks and exploitation of security vulnerabilities. Ransomware attacks keep happening, and this month we explore what ransomware is, review attacks that have occurred (and what their consequence were), as well as keep you informed of tools and what is being done to help safeguard against these pervasive attacks.
Visit the discussion forum on the Members Corner website to read the post in full. As always, we welcome your feedback and encourage you to comment on this post.
To address these and other shifts in the industry, NEACH convened a group of payments experts and innovators for its Aug. 3 town hall. Joe Casali, AAP, NCP, executive vice president of payments innovation at NEACH, moderated the panel. Panelists included:
All three panelists highlighted opportunities for financial institutions in the current and post-COVID culture. Drawing on the speakers' remarks, we are at an inflection point-a point in which customers have different expectations and demands around the speed of payments, how they interact with their financial institutions, an appetite for products and solutions that focus on the customer experience, and strategic partnerships for innovation. Read more about this Town Hall.
To help our members' navigate these changes, NEACH has launched a new Innovating Payments site. There, you will find articles, discussion boards, and new learning opportunities that dive deeper into the topics we touched on today, as well as others.
Included on the site are new resources, such as the Building Blocks of Faster Payments Series and RTP® Risks, Rules, and Regulations Courses, featuring Kevin Olsen, the Payment$ Professor. You can also take advantage of the "Innovating Payments Package," which includes access to:
- Building Blocks of Faster Payments (7 courses)
- Payment$ Professor Courses (2 courses)
- Faster Payments Webinar Series ( 6 courses)
- Innovating Payments Conference (1 registration)
And be sure to save the date for NEACH's annual Innovating Payments Conference, Nov. 16-17, 2020. The conference is going virtual this year, and we look forward to providing the same best-in-class educational experience our members have come to expect.
As always, NEACH staff are available to answer your questions via the Payments Hotline at 855-NEACHQA. Or contact us via email at firstname.lastname@example.org.
AUTHOR: Mark J. Dixon, AAP, APRP, NCP
Director, Payments Innovation
As the Director of Payments Innovation for NEACH, Mark focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Mark to read more of his blogs, articles, and posts.