This article originally appeared on LinkedIn.
Much of the conversation this year at the Chicago Payments Symposium centered on faster payments. This is not surprising, given the various faster payments initiatives that have popped up over the past couple years.
Faster payments are coming—fast.
NACHA’s same-day ACH was the first faster payments initiative in the United States to reach an operational status, going live in September. It is still a little too early for some practical feedback, but according to NACHA’s website, the implementation was smooth and that the transaction volume is “robust”. According to the 2016 AFP Electronic Payments Survey, likely uses for same-day ACH would be last minute bill payments, followed by emergency payroll—something also observed by NACHA after the implementation.
At the Symposium, the focus on ACH also circled around the ISO 20022 payments standard. At the FI level, NACHA’s ISO 20022 Mapping Guide and Tool facilitates translation of corporates’ ISO 20022 pain.001 credit transfer payment messages into ACH transactions. The idea is that “if a corporate implements ISO 20022 pain.001, it can execute U.S. ACH payments, and the mapping guide and tool illustrates how to translate those messages,” said Rob Unger, senior director, corporate relations and product management at NACHA. This can be very helpful for corporates interested in reaping the benefits of using the ISO 20022 standard.
Other faster payments initiatives were also high on the agenda. The Federal Reserve’s Faster Payments Task Force has entered into a new phase of reviewing the 19 proposals that have passed the initial screening. With a total of around 3,200 pages, there is certainly a lot of work ahead of the Task Force members making the evaluations. AFP is taking part of this effort and it will be very interesting to go through all the material. The Clearing House’s real-time payment system for credit payments, and the Global Payments Innovation (GPI) initiative from SWIFT were also discussed at the event.
Faster payments initiatives must be interoperable.
Going forward it will, at some point, be necessary to determine how the different faster payments initiatives will work together, and what it will mean for corporates. As attractive as international interoperability is, the scope of the Faster Payments Task Force is focused on domestic interoperability. One of the reasons for this is the differences that different payment systems have, even though they may use ISO 20022. Even in Europe’s SEPA, there are regional differences in the standard, and trying to include this in the scope for the Faster Payments Task Force is just adding too much complexity.
There were also some discussions regarding actual implementation of faster payments. In order for successful adoption of faster payments, some key factors need to be considered, like user experience, value proposition, interoperability, education, and fraud/security.
Blockchain creates opportunities—can potential problems.
As much promise as blockchain technology potentially can bring, it is not without barriers. One of the key features of distributed ledger technology is transparency, which at first seems like an obviously positive thing. However, it was argued that full transparency is not always appropriate, especially when it comes to transactions that need to stay confidential for business reasons. This has been labeled the transparency paradox.
One session featured Scott Hendry, special director of financial technology for the Bank of Canada (BoC), presenting some lessons learned from Project Jasper, a study focused on learning the basics of how blockchain works and where the real value is. One of the lessons echoes the transparency paradox in that the BoC felt the technology had too much information sharing.
After having heard a lot about the promises with blockchain in technology for some time, there seems to be a growing sentiment of making the technology practically applicable. With this comes a number of questions regarding fee structures and also standardization. One very interesting concept in the payments industry going forward will be bringing ISO 20022 into the blockchain technology discussion.Magnus Carlsson is manager, treasury and payments, for AFP.