The Federal Reserve Faster Payments Task Force aims to bring faster payments to consumers and businesses in the United States by the year 2020. Though our 2017 Flavors of Fast report counted 25 live global faster payments schemes, and 11 firmly in development, the arrival of a faster payments scheme in the U.S. marks a significant change for how consumers, corporates and financial institutions will experience money movement in the future. Despite that a faster payments ecosystem will usher the U.S. into a new era ripe for payments innovation, FIS Co-Chief Operating Officer Bruce Lowthers says it can mean significant challenges for financial institutions.
Yet, as Lowthers explains in a recent piece featured on PaymentsSource, there are best practices financial institutions in the U.S. can apply to their own faster payments strategy, based on other global payments schemes. For example, those institutions who establish a leadership position in their respective scheme are typically equipped with systems that are agile and innovative, and that create contextual relevance, for a host of use cases.
Financial institutions in the U.S. should also consider how other global payments schemes could have bearing on future expectations for money movement in the United States. Now that Europe’s PSD2 (second Payment Services Directive) is in effect, for example, banks in that region are required to provide regulated third-party providers access to information required to initiate payments. This shift to open banking could eventually influence the standards and expectations for acceptable service levels and payments capabilities around the globe.
At FIS, we know that determining how, when and why to enter the faster payments ecosystem is no small feat for a financial institution—regardless of its size, customer base, or available resources. That’s why we’ve invested in tools like our Real-Time Incubator service, which launched in 2017, to help financial institutions find a cost-effective and feasible entry-point for connecting in The Clearing House’s real-time payments system, RTP. In Fall 2017, the first official real-time transaction in the United States was successfully executed over the RTP. In December 2017, Fifth Third Bank announced that it selected FIS to help it enable real-time payments through the RTP, with plans to go-live in 2018.
That timeline is just one example of why financial institutions cannot afford to sit on the sidelines of the United States’ faster payments ecosystem until 2020.
Tags: Innovation, Payments, Technology