On October 18, 2016, DWT hosted a NYPAY panel titled “What’s Next for the Networks in a World of Faster Payments?” NYPAY is a New York-based forum for the payments and mobile commerce industry. The recent panel was part of a series of NYPAY events hosted by DWT.
Deborah Baxley, Partner at PayGility Advisors, moderated the panel, which included Dan Gonzalez, Vice President, Federal Reserve Bank of Chicago; Craig Maurer, Partner, Autonomous Research; Anand Ramakrishnan, President and Chief Executive Officer, Opus Consulting Solutions; and Steve Ledford, Senior Vice President, The Clearing House. Key takeaways from the panel include:
- Card networks must evolve to remain relevant in the newer, faster payments ecosystem. The U.S. payments industry continues to move toward faster payment solutions that challenge the relevance of traditional card networks. Newer, faster payment solutions provide businesses and consumers with faster payments as well as increased flexibility and functionality. The panelists suggested that MasterCard’s recent acquisition of VocaLink indicates that the card networks recognize the challenges posed by other payment solutions and are implementing strategies to overcome them. Given the card networks’ large market share, the card networks have the time and resources necessary to adapt to the changing payments ecosystem.
- Lack of a federal mandate for faster payments may prove helpful in the implementation of faster payments in the United States. According to the panelists, the United States lags behind other countries in the implementation of faster payments, in part, because the federal government has not issued a mandate to do so. The decentralized nature of the U.S. faster payments movement has afforded payment providers the flexibility to craft payment solutions uniquely situated to serve the U.S. market. U.S. providers have also had the opportunity to learn about potential risks and successes from early adopters. For example, since other countries experienced a spike in fraud after implementing faster payments, U.S.–based payment providers now can deliver faster payments solutions that also offer enhanced protections for fraud and similar risks.
- The Federal Reserve’s Faster Payments Task Force expects to issue its final report mid-2017. Gonzalez provided an update on the Federal Reserve’s Faster Payments Task Force, noting that a number of NYPAY members are members of the Task Force. The Federal Reserve established the Faster Payments Task Force in May 2015 to identify and evaluate alternative approaches for implementing safe, ubiquitous, faster payment capabilities in the United States. In January 2016, the Task Force issued effectiveness criteria for faster payments. More than twenty payment providers submitted proposals for solutions. An outside consultant has evaluated the submissions and members of the Task Force are now reviewing the proposals and related evaluations. The Task Force expects to issue a final report by mid-2017 with its assessment of the proposals and recommendations for next steps to achieve faster payments in the United States.
- Interoperability will be key to achieving ubiquitous faster payments. Faster payments have been achieved in select areas of financial transactions, notably wholesale payments, but are scarce in important segments of commercial or retail financial transactions. Looking to the future, panelists offered perspectives on interoperability—integral to making faster payments an everyday reality, from online commerce, to payroll, to POS, and so on. The panelists cited the lengthy timeline for achieving interoperability of ATM networks as a cautionary tale of the pitfalls of failing to build open payment solutions.
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