Blog

Fed to roll out roadmap for faster payments

The effort comes in response to research findings that consumers want instant payments and would be willing to pay for them.

January 30, 2015 by Jim Ghiglieri — Senior Vice President, Corporate Communications, SHAZAM

The Federal Reserve has begun planning for a faster U.S. payments system, following research that found consumers want such a system and would be willing to pay more for it.

In 2014, the Fed commissioned McKinsey & Company to study demand for faster payments. The results indicated that 70 percent of consumers preferred instant or one-hour payments, and were willing to pay for them. The Fed then completed a faster payments assessment to identify use cases for faster payments; develop potential options to speed up the current payment system; review the impact of each option; and develop an implementation plan.

Shazam has participated in a number of industry discussions on this topic and no matter the form this new system takes, it’s very likely we’ll provide support for our customers.

The Fed recently offered further insight into what revamping the U.S. payment system might involve, and it appears that developing a new infrastructure is in order.

"After going over the options with the industry, we think probably the easiest way to do it is to build something new," Dan Gonzalez, vice president of industry engagement at Federal Reserve Bank of Chicago, said at anindustry conference in New York late last year. "A new infrastructure would give the industry greater flexibility to meet unanticipated future needs." Gonzalez also said that development and placement of such a system will require significant time and money.

The Fed’s focus will be on developing a faster payments option for a subset of transactions that will most benefit from real-time processing. This subset constitutes between 10 and 12 percent of all U.S. payments.

The Fed also plans to create several industry task forces to provide input on speeding up transactions. These will include the creation of a faster payments council, a payments security council, and a U.S. payment strategy advisory council. Each group will lead a high-level strategic discussion about the process of developing new payment systems and practices. Task forces also will address security standards and practices across different payment channels; extension of the Fed’s Automated Clearing House service; and generating less expensive, quicker cross-border payments.

The Fed plans to unveil a broader roadmap for developing and implementing a faster payments infrastructure early this year. Watch this blog for the latest developments.

photo courtesy marc levin | flickr

About Jim Ghiglieri

---

None

Connect with Jim: