Exploring Irrevocability and Industry Next Steps

Reed Luhtanen, Executive Director, FPC

Faster payments are booming. Q3 Same Day ACH payments grew 23.5 percent over Q3 2021. RTP® grew roughly 29 percent over the same time. Because of the growing success of these payments, transaction limits for Same Day ACH and RTP increased to $1 million earlier this year, resulting in gains of 102.7 percent and 54 percent in value, respectively, for each of the payment types.[i][ii] And based on research, the gains will only continue, as it is estimated that faster payments will increase at a compound annual growth rate (CAGR) of 34.9 percent from now to 2030.[iii]

But with this continued increase in use and value, there is an expectation that there could be an increase in the number of disputes. For some payment mechanisms, like credit cards, the dispute and error resolution process is well defined. But for faster payments, we are in the earlier stages of addressing individualized disputes that meet consumer expectations while still enabling the instant and irrevocable nature of faster payments. It’s one of the reasons the FPC continues to explore the topic of irrevocability.

During our most recent Member Meeting, the Implications and Next Steps for Irrevocability in Faster Payments session featured panelists who agreed that the way best to address disputes is to stop them from happening in the first place. Emphasizing both fraud prevention and remedies for consumers, Gail Hillebrand of National Consumers League said, “Preventing the fraud is really important.” Carl Slabicki, Co-Head of Global Payments, BNY Mellon, concurred, and further explained that “It’s about what we are doing now and what more we can potentially do to help consumers in this shifting model where there’s a different expectation on what they can expect once a payment has been made.”

He continued, “If we can get better at fraud information sharing across the industry so we can more holistically recognize scams and patterns, we can share that information with the participants. That’s the only way we get better controls upfront to help the consumers see the things that they are not necessarily privy to.”

Faster payments provider Zelle is one organization leading efforts to help bolster information sharing and prevent fraud. During the irrevocability session, Laura Menken, Business Line Leader/VP of Product at Early Warning, Zelle’s parent organization, stressed that it’s about “Finding the balance between reducing consumer friction and putting in the right fraud and risk control. And it really is a collaboration between the network, the financial institutions that participate on the network, as well as the consumers.” To that end, Zelle has put in place measures that support its goal of protecting consumers and their transactions while continuing to meet expectations of convenient faster payments. Currently, the organization develops tools and controls for participating financial institutions to use to mitigate frauds and scams; has rules and policies in place that are effectively enforced; manages information such a tokens, IP addresses, and device data; reports fraud and scams to participating financial institutions; and provides mechanisms for participating financial institutions to exchange data.

So, even with the growing volume of faster payments, steps are already being taken to minimize disputes by instituting preventive measures that involve a full spectrum of industry participants. And when issues arise, as inevitably they will, as Hillebrand said during the session, “Irrevocable is not the same as irremediable.” A faster payment gone wrong doesn’t necessarily mean money can’t be returned. Issues can be resolved. Problems can be fixed. But what better way to remedy those than to help eliminate them from the beginning?

The FPC will continue to explore hot topics like irrevocability as we further our efforts to advance faster payments. If you’d like to be part of the discussions shaping the future of these subjects, consider joining the Faster Payments Council. Our Work Groups are actively identifying and working on projects to support and further the issues that will ultimately enable convenient and efficient faster payments for all. Learn more today.

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