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The Federal Reserve’s Faster Payments Task Force is in the final stages of reviewing 19 proposals to speed up U.S. electronic payments, Fed executives tell Digital Transactions News.
The faster-payments initiative is part of the Fed’s broader Payment System Improvement project that also addresses security and efficiency issues. The Fed on Thursday issued the first of a two-part final report about the faster-payments project, which is being overseen by a 320-member task force of executives from financial institutions, vendors, and tech companies, as well as representatives of consumer groups and government.
The report’s first part gives a high-level overview of what the task force is and its mission, as well as a review of the payments landscape and the benefits of faster payments. The juicier stuff will be in the second part, which the Fed expects to release some time around mid-year. That segment will identify the entities, currently 19, that have submitted faster-payments proposals to the Fed for review and have completed a formal assessment process, and give details about their projects.
Twenty-two entities initially submitted proposals, but three elected not to go on, the Fed disclosed last October. The Fed hired consulting firm McKinsey & Co. to conduct the assessments, and task-force members also provided input. While the Fed won’t yet identify what it calls the “proposers” until the second part of the report comes out, a few have declared individually that they’ve thrown their hats into the ring. They include The Clearing House Payments Co., which is working with United Kingdom-based VocaLink and processor Fidelity National Information Services Inc. (FIS) to build an entirely new set of payments rails in the U.S. Another proposer is Des Moines, Iowa-based fintech firm Dwolla Inc.
The proposers are reviewing the feedback they’ve received from McKinsey and the task force. “The proposers are responding to those comments as we speak,” Sean Rodriguez, a senior vice president at the Federal Reserve Bank of Chicago and the Faster Payments strategy leader, tells Digital Transactions News. “In the next week or two the proposers will decide … whether they want to go to the last phase.”
Rodriguez reiterated that the Fed isn’t going to declare a payments champion, but instead wants to showcase the best ideas and leave it to the marketplace to decide which ones are worth implementing. “Our thinking all along about this process [has been] neither the Fed nor the task force was trying to pick a winner,” he says.
“We envision that those assessments and task-force commentary will really inform stakeholders,” adds Connie Theien, a senior vice president at Chicago Fed who handles industry relations for entire Federal Reserve system.
Meanwhile, the Fed’s separate task force charged with improving payment security continues to work on best practices for risk management, data protection, and improving information sharing among companies and organizations. That task force expects to publish its findings and recommendations in the third quarter, according to Theien.
The improvement project also aims to enhance the efficiency of U.S. payments, especially through standards that affect cross-border and business-to-business payments that would include remittance and invoice details as well as payments data.
