The U.S. Path to Faster Payments
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THE U.S. PATH TO FASTER PAYMENTS FINAL REPORT PART ONE: THE FASTER PAYMENTS TASK FORCE APPROACH FASTER PAYMENTS TASK FORCE JANUARY 2017 • PART 1 FASTER TASK PAYMENTSFORCE TABLE OF CONTENTS 03 Preface 04 Part One of the Final Report (January 2017) Section 1: Task Force Background and Process (4-14) Introduction Task Force Mission and Objectives Task Force Representation Task Force Process Section 2: U.S. Payments Landscape and Benefits of Safe, Ubiquitous Faster Payments (15-36) Introduction Why Faster Payments? Why Now? U.S. Payments Landscape Global Implementations of Faster Payments Broad Benefits of Safe, Ubiquitous Faster Payments Benefits for Providers and End Users of Faster Payments Appendices (37-62) Faster Payments Task Force Participant Roster Capability Showcase U.S. Payment Systems Governance and Regulatory Landscape Part Two of the Final Report (To be released in 2017) TABLE OF CONTENTS 2 PREFACE The Faster Payments Task Force is a and publish Part Two of the report in broad and inclusive group of payment mid-2017 to share its assessment of industry stakeholders with representatives proposals for faster payments solutions, from organizations across the payment and recommend next steps for the ecosystem, including financial industry to take to achieve safe, institutions, non-bank payment ubiquitous faster payments capabilities. providers, regulators, standards bodies, This publication, Part One of the Final consultants, businesses (merchants and Report, focuses on two topics. The first corporates), and consumer groups. The section provides a description of the Federal Reserve assembled the task force task force’s mission and process. The to collaboratively identify and evaluate second section provides greater detail alternative approaches to implementing about the motivation behind the task safe, ubiquitous, faster payments force’s work in the context of the capabilities in the United States. current payments landscape— The task force continues to work toward explaining why the task force came this goal, and is expected to culminate its together to identify and evaluate efforts in mid-2017 when it will publish effective faster payments solutions in its assessment of faster payments the United States. capabilities, analysis of remaining Acting primarily as a catalyst, the challenges and opportunities, and Federal Reserve has encouraged and recommendations for successful supported payment stakeholders in implementation of faster payments coming together in a collaborative effort in a final report. to understand how to progress toward In an effort to continue the dialogue payment improvements in a complex within the payment industry and with economic environment. This report the general public, the task force has reflects the broader task force’s analysis decided to release its final report in two and collective views. parts. This is Part One of the final report. Statements contained in this report It describes the background and process do not necessarily reflect the specific of the task force’s work and its motivation position of any or all task force for pursuing faster payments solutions participants, nor do they necessarily in the context of the current payments reflect the views of the Federal Reserve. landscape. The task force will complete PREFACE 3 SECTION 1 BACKGROUND AND PROCESS INTRODUCTION In early 2015, the Federal Reserve issued Task Force (“task force”) and the Secure the Strategies for Improving the U.S. Payments Task Force.1 These task forces, Payment System paper that outlined and the efforts leading up to their the collective thinking of U.S. payment formation, leveraged a desire and a system stakeholders and the Federal commitment among industry stakeholder Reserve on desired outcomes for groups to collaborate on a vision to improving the U.S. payment system. achieve system-wide evolution. The desired outcomes include The Faster Payments Task Force was improvements in speed, security, convened by the Federal Reserve in May efficiency, cross border payments, and of 2015. The task force has focused its industry collaboration. This effort was efforts on identifying goals and attributes the culmination of several years of of effective faster payment systems; collaboration between the Federal proposing solutions and assessing their Reserve and industry stakeholders to capability to achieve those goals; and set a vision for modernizing payments championing the payment industry to in the United States. take steps toward implementation and The Federal Reserve’s strategies paper adoption of faster payments capabilities. called upon payment system stakeholders The Federal Reserve serves to support the —including financial institutions, non- task force in its progress toward these bank providers, businesses, retailers, outcomes by facilitating task force consumer groups, standards bodies, and meetings, providing resources to assist other organizations involved in making, task force work efforts, and soliciting receiving, and processing payments—to participation from volunteers across the form two task forces: the Faster Payments payment industry. SECTION 1 5 TASK FORCE MISSION & OBJECTIVES As stated in the Faster Payments Task Force Charter, the mission of the task force is to “identify and evaluate alternative approaches for implementing safe, ubiquitous,2 faster payments capabilities in the United States.” This mission supports a key desired outcome identified in the Federal Reserve’s strategies paper, to achieve: To accomplish this mission, the task force set out A ubiquitous, safe, faster electronic to achieve several important objectives as stated in the original charter: “solution(s) for making a broad variety of business and personal • Represent diverse stakeholder views on future needs for safe, ubiquitous faster payments, supported by a flexible payments solutions and cost-effective means for • Assess alternative approaches for faster payment clearing and settlement payments capabilities, including: groups to settle their positions - Description of the core infrastructure, rapidly and with finality. including access model; ” - Security and operational changes needed for participants to interface with the infrastructure; - Estimated cost and time to implement; and - Other factors deemed important to determine the effectiveness of an approach. • Address other issues that arise through task force discussion that are deemed important to the successful development of effective approaches for implementing faster payment capabilities. As task force work has progressed, the execution of these objectives has shifted over time through the development of various task force work products. Initiatives to accomplish the task force’s objectives have centered on identifying desired attributes of effective faster payment models, soliciting proposals for faster payments solutions, assessing the ability of each solution to deliver these attributes, and identifying remaining challenges and opportunities for faster payments implementation. SECTION 1 6 TASK FORCE REPRESENTATION FIGURE 1: FASTER PAYMENTS TASK FORCE SEGMENT REPRESENTATION 320 PARTICIPANTS AS OF DECEMBER, 2016 3% Consumer Interest 4% Organizations 2% Business End Users Government End Users 29% 9% Other Industry Small Financial Segments* Institutions * Other Industry Segments 14% include representatives from industry organizations, Medium regulators, rules and standards Financial organizations, consultants, Institutions and academic institutions. 31% 8% Non-Bank Large Financial Providers Institutions To ensure comprehensive perspectives and The task force also established smaller work stakeholder views were represented in the groups to address specific issues emerging over initiative the Federal Reserve engaged a diverse the course of their work. Volunteer work groups set of participants and maintains an open call analyzed topics such as the legal framework, for anyone interested to join the task force, rules and standards, safety and security, continually recruiting to seek a balanced governance, adoption, interoperability, and membership of payment stakeholders. Task force other key issues that might affect the successful participants represent eight stakeholder segments implementation of faster payments solutions. (referred to as “segments”) as shown in Figure 1. While stakeholder segment groups frequently Each of these eight segments elected worked together to refine their views, task force representatives to serve on the Faster Payments participants largely collaborated across industry Steering Committee, an advisory body lines and segments to avoid sector bias. coordinating with broader segment membership In addition, the Faster Payments Task Force to establish segment-specific positions and worked closely with the Secure Payments Task provide guidance on key decisions. The 18 Force on establishing criteria to measure the steering committee members, with balanced security of faster payments solutions. The two representation across segments, maintain a task forces continue to collaborate on pulse on segment views as they recommend security-related issues such as evaluating approaches for achieving milestones in the broader security challenges and opportunities phases of task force work. for faster payment systems. SECTION 1 7 TASK FORCE PROCESS With facilitation support from the Federal Reserve, the task force participates in the development of the project plan, process, work products, and key decisions through face-to- face meetings, teleconferences,