Magnus Carlsson, Manager, Treasury & Payments, AFP
I recently attended NACHA’s Payments 2016 conference which covered a wide range of topics, with special attention paid to the ISO 20022 payments standard, faster payments developments, as well as the ever-present threat of payments fraud.
In a panel session, AFP, along with SWIFT and Microsoft, provided a corporate perspective on the challenges around implementing the ISO 20022 payments standard. Generally, corporate treasurers are finding it particularly difficult to build a business case for investing in a new payments infrastructure.
Depending on the current payments system and processes set up, the cost for implementing a new standard can be significant. Therefore, it is important to understand that even if a new standard can provide greater efficiency and cost savings, a wait-and-see approach may still be the most prudent action for a corporate.
Another challenge is the sustainability of the standard. If a corporate decides to make the investment to comply with the new standard, they need to be assured the underlying standard will not change to such a large extent that additional investments will be necessary. With the number of versions of the standard being developed, this could prove to be a major problem. It may also be a good idea to reflect on the problems that the SEPA implementation faced in eurozone.
In the faster payments field, particular focus is naturally on Same Day ACH, as NACHA’s new, faster capability will become operational in September 2016. Treasurers will need to prepare for this as they may begin receiving ACH payments sooner than traditional ACH, including handling of returns, etc.
Real-time payments were also a hot topic at the event, with The Clearing House’s real-time capability for credit transactions catching a lot of buzz. Questions regarding timing and usability have been frequently asked.
But while real-time payments are the talk of the town, current payments methods in the U.S. aren’t going anywhere. While some payments may need to be instantaneous, other payments such as planned payrolls are fine using legacy systems like traditional ACH. Another overall consensus is that the reason real-time payments are finally making progress is due to the U.S. market finally ready for them.
The Federal Reserve’s Faster Payments Task Force also provided an update. It is getting ready for what some participants call the “fun part” of the project—reviewing and analyzing all the proposals for a faster payments system. An independent consulting firm, McKinsey, has been selected to rate the incoming proposals against the various criteria the task force has spent the past year developing.
Of course, with payments becoming faster, focus should also be on fraud and how ACH can potentially be a more interesting target for business email compromise (BEC) scams.
AFP presented the results of its 2016 Payments Fraud and Control Survey, underwritten by J.P. Morgan, in a special session. AFP was accompanied by Peter Karegeannes from the U.S. Secret Service, who provided excellent insights on how his agency works to combat fraud. The most important prevention method for BEC fraud is to put in place internal procedures that prevent the possibility of payment generation based on instructions from other than approved sources. He also recommends dual authentication, and in case of any uncertainty, having a procedure to always double check with a simple phone call.