Catalyst News

Faster Payments: ‘This is Coming. This is Happening,’ Says Kim Ford

by Catalyst Corporate | Nov 05, 2019

As its name implies, the nation’s faster payments initiative is moving… well, fast. For some, it’s still hard to conceptualize. For others, it’s hard to agree on the best approach. But one thing is certain: with the Federal Reserve Bank’s recent announcement of FedNow – an interbank 24x7x365 real-time gross settlement service – faster payments is the way of the future.

This whirlwind of payment change brings new challenges and new opportunities – which is exactly why the U.S. Faster Payments Council (FPC) is focusing its efforts on educating the payments industry.

Newly appointed Executive Director of the U.S. Faster Payments Council Kim Ford joined 40+ credit union leaders for a breakfast session on faster payments at Catalyst Corporate’s recent Economic & Payments Forum. She provided an overview of the FPC’s mission, objectives and goals and shared some of the latest faster payments developments.

“We’ve witnessed the evolution of the U.S. payment system over the last decade, and now we’re at a turning point. The instant gratification mindset has helped drive the emergence of faster payments, so what we do now shapes the future,” she said.

This initiative will not eradicate, but, rather, run parallel with the nation’s existing payment rails, she said. “We’re working to develop a faster payments solution that will work in conjunction with checks, credit/debit and ACH payments, because those payment rails aren’t going anywhere.”   

The FPC was assembled with a goal of helping “facilitate a world-class payment system, where anyone can safely and securely pay one another, anywhere, at any time, and with near-immediate funds availability.” It is a diverse collection of payments professionals, comprised of business end users, consumer organizations, financial institutions, payment network operators and technology providers.

“It’s our goal to give everyone a seat at the table,” Ford added.

The FPC is paving a path to a ubiquitous faster payments solution. They have identified the following objectives to help accomplish this task:  

  • Education – spearhead initiatives to foster better understanding of faster payments and confidence among providers and end users to increase adoption
  • Problem-Solving – tackle the tough issues that inhibit adoption of faster payments and enable end users to pay and be paid in seamless and transparent ways
  • Industry Guidance – identify, develop and evaluate practices, principles and guidelines that enhance safety, security, and transparency, and enable opportunities and access

“Why is there such an industry-wide focus on faster payments now? Ultimately, customer demand is on the rise. As their expectations increase, so, too, do their needs,” said Ford.

The need for speed is real, she said. Ford shared a few eye-opening faster payments statistics:

  • 40 percent of consumers desire real-time banking services from their provider
  • 82 percent of corporations say real-time payments resolve current payment challenges
  • 72 percent of small businesses currently use or would like to use expedited payments if available

Many use cases are emerging in today’s market, Ford noted. “The possibilities continue to grow as we explore the application of faster payments and its reach.”

Faster payments use cases:

  • Business to Business
    • Merchant settlements
    • Vendor payments
    • Cash on demand
    • Delivery services
    • Contractor payments in store
  • Business to Consumer
    • Payroll (gig economy)
    • Insurance disbursements
    • Returns, refunds, rebates
    • Clinical trials
    • Awards programs
  • Consumer to Business
    • Paying rent
    • Point of sale/online purchases
    • Loan & credit card payments
    • Bill pay, including “just in time” payments
    • Down payment on a vehicle

Ford touched on faster payments solutions available today, including Nacha Same Day ACH, the Clearing House RTP® Network, Early Warning Zelle®, Visa Direct, MasterCard MoneySend, Shazam Network, and ExcheQ.

Regarding future solutions, she said the Fed believes its FedNow service will “enable financial institutions across the country to offer real-time payments to their customers, operate alongside private-sector services, and provide a modern payment infrastructure for safe and efficient faster payments that allows innovation and competition to flourish.”

Still in the early planning stages, the Fed is sorting through a few determining factors, including:

  • Analysis of public comments received in response to the 2018 request for comment
  • Board’s policy assessment that such a service would meet the requirements of the Monetary Control Act and the Board’s criteria for new or enhanced Reserve Bank payment services

In the meantime, the FPC will continue its efforts to educate the industry on the faster payments initiative, and ultimately, work toward establishing a ubiquitous solution.

What does this mean for credit unions?

“All this work is shaping how faster payments will unfold,” Ford said. “This is an unprecedented era in payments, wrought with challenge, but also bursting with opportunity. How we respond to this evolution will shape how we do business as financial institutions, now and into the future. It’s our mission to not only respond to the change, but to lead it. We will get to universal faster payments. How we do that is up to us right now.”