|Agency||Federal Reserve Banks|
|Rule Name||Payment System Improvement Paper|
|Comment Due Date||12/13/13|
On September 10, 2013, the Federal Reserve Banks published a public consultation paper (Paper) designed to start a conversation and ultimately improve the US payment system. In the face of rapidly evolving technology, the Federal Reserve Banks are hoping to centrally coordinate the development of “open payment networks and/or broadly interoperable networks” by bringing together the payments industry and fostering coordination to drive payment system improvement.
The purpose of the Paper is:
1. To articulate the Federal Reserve Banks’ perspective on:
2. To solicit broad industry input on:
Gap/Opportunities in Today’s Payment System
The Federal Reserve Banks conducted a gap and opportunity analysis of the payment environment to understand key areas where the payment system could be improved relative to the vision of safe and accessible but faster and more efficient payments on an end-to-end basis. The following are the key gaps and opportunities identified:
5. In general, cross-border payments from and to the United States are slow, inconvenient, costly, and lack transparency regarding fees and timing.
6. Mobile devices have potential to transform wide ranging aspects of business and commerce, including the payment. Digital wallet applications on mobile devices provide merchants with valuable information that can be leveraged for commercial purposes such as consumer-specific location information, transaction history, and other context-specific data. With some digital wallet applications, the payment instrument is selected during the initial set-up phase and the payment takes place in the background thereafter, reducing the visibility and choice of payment instrument at the point of sale. Payment service providers are seeking to define their service offerings in this new world.
7. Businesses (especially large ones) have payment and accounting systems that are complex and costly to change, making it difficult to achieve automated, straight-through processing of invoices, payments, and remittance information.
8. Consumer fears about payment security sometimes inhibit adoption of electronic payments.
The Federal Reserve Banks have identified five desired outcomes to be achieved within ten years to address the gaps and opportunities identified above. The outcomes reflect the Federal Reserve Banks’ internal analysis and input from a variety of industry stakeholders.
Desired outcome 1: Key improvements for the future state of the payment system have been collectively identified and embraced by payment participants, and material progress has been made in implementing them.
Desired outcome 2: A ubiquitous electronic solution(s) for making retail payments exists that does not require the sender to know the bank account number of the recipient. Confirmation of good funds will be made at the initiation of the payment. The sender and receiver will receive timely notification that the payment has been made. Funds will be debited from the payer and made available in near real time to the payee.
Desired outcome 3: Over the long run, greater electronification and process improvements have reduced the average end-to-end (societal) costs of payment transactions and resulted in innovative payment services that deliver improved value to consumers, businesses, and governments.
Desired outcome 4: Consumers and businesses have better choice in making convenient, cost-effective, and timely cross-border payments from and to the United States.
Desired outcome 5: The Federal Reserve Banks have collaborated, as appropriate, with the industry to promote the security of the payment system from end-to-end amid a rapidly evolving technology and threat environment. In addition, public confidence in the security of Federal Reserve financial services has remained high.
Questions to Consider
The Federal Reserve Banks’ Payment System Improvement Paper includes 21 questions to consider. The Leagues have captured several of the questions for your consideration and to assist you in digesting the areas for comment. We do recommend that you refer to the Paper and review the entire list of questions as you prepare to comment and provide input on improving the Payment System.