Earlier this month, SWIFT announced that it would be providing an interface for The Clearing House (TCH)’s upcoming Real-Time Payments (RTP) system. SWIFT’s Alliance Messaging Hub (AMH) will act as a gateway for banks to manage the requirements of the different networks they connect to, one of which is RTP.
Though SWIFT has dabbled in domestic payments before, this feels a bit different. This time it feels like a clear indication that traditional players in the payments field aren’t sitting on their hands while real-time payments infiltrate the entire infrastructure.
Indeed, TCH itself would be another one of those players, as would the Federal Reserve. And while it’s not real-time, NACHA has also gotten in on faster payments with Same Day ACH. All of these organizations have been in the game for a long time, and with change coming rapidly to payments—not only with the push for real-time but also with the introduction of new technologies like blockchain—they’ve all realized that they need to change if they don’t want to be left behind.
A Peak into the Fed’s Faster Payments Final Report
As these organizations gradually pull back the curtain on their projects, it’s important for treasury and finance professionals to pay attention and see how faster and real-time payments could apply to their organizations. One development that could have major ramifications for practitioners was the release of the second part of the Federal Reserve Faster Payments Task Force’s final report on achieving secure, ubiquitous, faster payments in the United States by 2020.
The report reviews the various proposals that were submitted to the Fed by providers across the payments industry and concludes with ten recommendations the payments industry should include in the development of a new faster payments system. The report states that the key to a successful faster payment system is ubiquitous receipt, which means that all payment service providers can receive faster payments and make the funds available to customers in real time. The Task Force is quick to point out in the report that the faster payments solutions already under development in the U.S. will be of little value if end-users have to invest in multiple services to reach other end-users.
Of course, there are challenges to achieving ubiquity— technical and business process issues, different rules and functionality around competing solutions, security, etc. Other nations have instituted mandates to correct these problems, but the Fed has opted to let the stakeholders work it out.
What’s to Come
There’s still some debate over whether that approach will work, but in the coming months we should get a little more clarity. One way that corporate treasury and finance professionals can catch a glimpse of what’s to come is by attending the Payments Breakfast at AFP 2017. Sean Rodriguez, CCM, Senior Vice President and Faster Payments Strategy Leader of the Federal Reserve System will review the recent report and provide attendees with an in-depth look at the work that the Task Force has been up to.
While it will likely be some time before many of the solutions presented to the Fed go into action, this session will be a great opportunity for financial professionals to really get a glimpse at what these providers are up to and what the Fed thinks of their proposals. Because eventually, these solutions will be here, and treasury and finance practitioners are going to have to make a choice over whether they’re going to get on board the train or risk being left in the dust.