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Working Through Faster Payments Challenges and Opportunities in FPC Work Groups

Reed Luhtanen, Executive Director, FPC

Real work happens in the FPC’s Work Groups. They’re where we engage in the sometimes difficult, but necessary, dialogue to move faster payments forward. They’re where we identify the best options to solve specific problems. They’re where we create the tools to support industry understanding and adoption. And the more we are able to do this, the closer we get to achieving our mission of ubiquitous faster payments in the United States.

That’s why I’m so excited about the launch of our newest Work Groups: Financial Inclusion and Real-Time Recurring, which add to our existing six Work Groups that include Regulatory, Education & Awareness, Fraud Information Sharing, Cross Border Payments, and QR Code Interface. Our two newest Work Groups can play a significant role in helping to advance adoption and use of faster payments.

Take Financial Inclusion first. According to the Federal Reserve, 22 percent of American adults are unbanked or underbanked. That’s about 50 million people. Many of these individuals rely on alternative financial products like payday loans, check cashing services, and more to make ends meet, which can cost consumers an average of $3,000 annually

Faster payments can offer these consumers an alternative to costly financial products. Faster payments can provide choice, putting power in the hands of consumers. Faster payments can provide transparency and an accurate line of sight into account balance and details allowing for improved management of finances.  And our Financial Inclusion Work Group plans to create a blueprint for leveraging faster payments to accelerate access to the financial system for those unbanked and underserved Americans. The Group will work to showcase and explain how faster payments adoption is part of a holistic approach to advancing financial inclusion and mitigating some or all of the issues, concerns, and needs of those most in need of financial services.

The Real-Time Recurring Work Group will also be a significant force in advancing faster payments. Recurring transactions continue to climb in use, with estimates that recurring debit and credit payments in the United States will reach $473 billion this year. Consider that growth in light of an expected increase in Internet of Things (IoT) payments, many of which could be recurring, and other subscription-based payments, and the volume will multiply. 

For businesses, consumers, and financial institutions, being able to better manage the volume of customer payments, specifically recurring payments, via real-time processes would be a big win. Why? Because according to research, finance teams spend 30 percent of their time on manual reconciliation of payments, which can include recurring payments. Declined recurring payments - particularly when there’s a new card number, expired card, or an account is closed - cost businesses, and in today’s environment, every payment counts: so much so that in a recent survey, 48 percent of SMBs said that the next missed payment from a customer could put them out of business. 

Real-time payments can solve these challenges. Real-time payments can support faster delivery of invoices, expedite receipt of payment, and allow for information to flow with the payment, minimizing manual efforts, increasing straight-through processing, and improving cash flow. As such, the Real-Time Recurring Work Group will explore the development and adoption of real-time recurring payment solutions to support the needs of businesses and the financial institutions that aid them. 

Efforts within the Financial Inclusion and Real-Time Recurring Work Groups are underway. We are excited for the work and deliverables on these topics that will surely advance and shape the future of faster payments. 

If you are interested in supporting the efforts of the Financial Inclusion or Real-Time Recurring Work Groups, or any of the other FPC Work Groups, consider becoming an FPC Member. Membership and Work Group efforts will be rewarding and meaningful. We look forward to collaborating with you to move the industry forward.  
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