New Technology in Electronic Payments to Improve Speed of Transactions
This paper released by the Fed on September 10th 2013, outlines the Fed’s wishes to speed up Electronic Payments. They believe that the rapid adoption of technology and evolving end-user expectations make this the best time to improve both the Speed and Safety of electronic payments. It wants Electronic Payments to be almost in real-time. Their main area of focus is with reference to ACH Payments going through the 2 main clearing houses. It wants banks to move money more quickly then they currently do. The technology to speed up electronic payments is there, but adoption by banks is slow at the moment. In 2010, the Fed offered banks the option of settling electronic payments transactions within the same day they were initiated, but in 3 years, only about 50 banks out of a total 14000 nationwide have taken up the offer.
Real-Time Electronic Payments
The best part of this new wish would be for consumers. Currently there is no way for a consumer to make almost real-time electronic payments in a convenient and cost-effective way. Also, if you don’t know the recipient’s bank account number, there is no way for you to transfer money to them. The Fed aims to change this too. They want an enhanced electronic payments system that would use cellphone numbers or other identifying information that is readily available to make transfers.
Fed Will Step in if Banks Don’t Speed Up Electronic Payments
The Fed is responsible for promoting safe, efficient nationwide payment systems, but it has generally taken a back seat and allowed the private sector to innovate and enhance payment systems as necessary or as technology deemed it. Not any more. The Fed wants to see the private sector boosting its efforts or it will take matters into its own hands. This was signaled in a recent speech by Federal Reserve Bank of Cleveland President Sandra Pianalto as she praised the “entrepreneurial activity of banks, vendors, processors, and non-bank service providers,” saying free-market competition has led to lower costs and a diverse range of services.”
But she added: “There have been times … when individual action on the part of banks, vendors, and non-bank service providers was not sufficient to move the payments system forward.”
Other countries like Mexico and the United Kingdom had to use government pressure in order to push for near real-time electronic payments. That may be needed in the US, but the Fed is not really pushing at the moment. Instead it’s giving a generous time period of 10 years while it works out desired outcomes with banks but the need for change calls for a much earlier time frame. Whatever the outcome, everyone concerned will gain from this initiative.
American Banker discusses about the Fed’s efforts more in-depth in their article here.
For more information on Electronic Payments or any other related processing services, Access Payment Systems will gladly help to educate your business or give advice on the current structure you are using. Contact Us today.
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