SAN DIEGO, CALIF. – Monday morning at the Payments Breakfast at AFP 2017, there was a clear message to treasury professionals from keynote speaker Sean Rodriguez, CCM, Senior Vice President and Faster Payments Strategy Leader of the Federal Reserve System: you can’t afford to sleep on faster payments. He stressed that faster, and perhaps real-time payments are going to be a reality in the United States—and it might be sooner than most of us think.
“We really need to reach the people here this morning,” he said. “You as treasury professionals really need to get engaged in this journey to faster payments in this country. You are going to be critical to make this new payments rail work. It’s going to take all of your efforts to get engaged with the financial institutions. This is going to be a ton of work.”
Rodriguez provided attendees with a glimpse into the Fed’s Faster Payments Task Force process, which culminated in its July 2017 final report. That report featured 10 recommendations for the U.S. to achieve a faster payments system by 2020, as well as its assessment of the faster payments proposals it received during the process.
Unlike other nations which passed a mandate to get the ball rolling on a faster payments solution, the U.S. central bank opted to let the industry lead the way. The Task Force was there to provide guidance, but not so much that it was impeding innovation. “The idea was to enrich proposals; not audit them and tell them what they’re not doing well,” Rodriguez said.
The faster payments rail that the Fed envisions will speed up transactions, while also delivering remittance information along with the payment. “It’s going to be a major overhaul to your backroom processing operations,” Rodriguez said. “So the sooner you get engaged and understand the implications, the better.”
Rodriguez also provided attendees with an inside view on the next steps in the process—establishing a governance framework for faster payments. To achieve this goal, the Fed has assembled a 27-member Governance Framework Formation Team to devise the structure and processes necessary to complete the task.
“The real objective of this ground is to design an initial membership structure—size, competition, roles, voting rights, etc.,” Rodriguez said. “And certainly, once we get a draft of the framework together, we want the public to comment on it.”
The Fed plans to move fairly quickly; it expects to have the first draft of its governance framework by early 2018, with the final draft set to be released sometime in the second half of 2018. “We don’t want this to be the reason why we don’t make the 2020 faster payments rail,” Rodriguez added.