What’s in a Faster Payment (or Faster Payments System for That Matter)?
Kim Ford, FPC Executive Director, FPC
Faster payments can mean different things to different stakeholders. Faster payments can signify a same-day, immediate or instant payment, or even an instant message transfer. And, to some, a faster payment can be a notification that takes place in a speedier manner than a previous process.
According to the Committee on Payments and Market Infrastructures of the Bank of International Settlements, fast payments are “payments in which the transmission of the payment message and the availability of final funds to the payee occur in real time or near-real time, and on as near to a 24-hour and 7-day basis as possible.”
While we aren’t quite ready to narrow in to that specific of a definition – after all, the FPC is solution agnostic, and we recognize that the U.S. is still beginning its faster payments journey – we’ve found that even with different views on what faster payments are, there IS consensus on the attributes of a system needed to support faster payments. According to the Faster Payments Barometer, stakeholders cite three main attributes: 85% believe systems must enable immediate funds availability to the beneficiary; 84% maintain that the system must be available 24x7x365; and 80% state the system must allow for instant confirmation to sender and receiver.
These are the attributes the industry has identified as key to systems that seek to enable faster payments. While there are others – 74% agree that dispute resolution should be an inherent capability in a faster payments system, and almost a third believe a directory service is a defining attribute – funds availability, round-the-clock access, and instant messaging sit atop the list for system requirements.
These attributes align well with existing and proposed faster payments systems in the U.S. Take the Clearing House’s Real-Time Payments (RTP) network, for instance. RTP® is a 24x7x365 system that offers immediate funds availability to the receiver. And it provides for instant notification to senders and receivers around transaction status.
And even the proposed FedNow℠ system is being designed with these attributes in mind. According to the Federal Reserve’s proposal, the FedNow℠ Service “would process individual payments within seconds, 24 hours a day, 7 days a week, 365 days a year.” Additionally, “use of the service would require participating banks to make the funds associated with individual payments available to their end-user customers immediately after receiving notification of settlement from the service.”
We are working with FPC members and the industry to see to it that these and other key system attributes as identified in the Faster Payments Barometer continue to underpin or become new supporting characteristics of the U.S. faster payments ecosystem.
For instance, in our Directory Models Work Group, we are exploring various models of directories in the US payments marketplace, and this work group will be looking at considerations for directory providers as new solutions are brought online that want a way to look up payment recipients and route payments accordingly.
This serves as only one of the many activities we are pursuing through the FPC’s Work Groups and other initiatives. Today, faster payments might hold different meanings for different payments stakeholders, but through the efforts of the FPC, we hope to get the U.S. payments ecosystem to a shared understanding of ubiquitous faster payments.