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Minal Gupta, Vice President of Remote Services for Star One CU.
Minal Gupta, Vice President of Remote Services for Star One CU.

Minal Gupta: ‘FedNow’ Insights During DFPI and Fed Sessions

The Federal Reserve’s new FedNow Service is here! Join credit union and banking leaders nationwide on August 31 for a lively 90-minute virtual event, featuring panel discussions with financial institution payment leaders sharing their launch experiences — including Minal Gupta, vice president of remote services for Star One CU.

In addition to panelists describing the ways they are supporting a variety of instant payment use-cases at their respective financial institutions, Fed leaders will preview what’s next for FedNow, as well as upcoming engagement opportunities. Space is limited for this event — so register today to save your spot.

Gupta has helped explain how Star One CU is one of the first financial institutions nationwide to create a convenient and secure consumer-user interface for members to utilize FedNow’s services through the credit union’s technology and efforts.

She was recently tapped as an educational resource in a training session for California Department of Financial Protection and Innovation (DFPI) employees. Her responses to the following question-and-answer session are insightful as fellow credit union leaders kick off their own FedNow journey:

Can you describe Star One Credit Union’s experience using FedNow and some of your insights so far?
The moment we went live with FedNow, members immediately started utilizing the service, even before we announced its availability. The feedback has been overwhelmingly positive, and members wished more financial institutions were on the participant list.

We’re confident the participant list will grow over the next few months. Our experience demonstrated that members are looking for a quick and easy real-time payments/transfer solution that FedNow provides. We believe the Federal Reserve has done a great job of designing and developing an outstanding payment service that will be widely accepted and used to move money throughout the economy.

We also want to credit Tyfone, our service provider. Tyfone has helped Star One Credit Union build the user-interface for FedNow.

What does FedNow mean for consumers?
Consumers are looking for real-time money movement as we have seen, especially with the migration to apps like Venmo, CashApp and Zelle. Most consumers would prefer to use a real-time payment solution offered by their trusted financial institution. FedNow is a secure and reliable network that provides the highest level of privacy protection and is accessible through online and mobile devices.

What does FedNow mean for financial regulators?
We believe regulators should have confidence in the FedNow service because it’s powered by the Federal Reserve, which has provided a reliable and trusted Automated Clearing House (ACH) network for so many years. The Federal Reserve probably has a better understanding of the financial industry and its regulations when compared to the fintechs.

The regulators also know that financial institutions are under more scrutiny when it comes to regulatory compliance, so offering a service such as FedNow should lessen their concern regarding security and privacy. Also, FedNow will give all financial institutions access to a secure, reliable, and cost-effective payment system that will provide the highest levels of privacy protection for consumers.

If you had a crystal ball, what do you see in the year ahead — and within the next five years as well?
We believe that all financial institutions will participate in the FedNow service in the future. Initially, it may not replace other payment services, but as FedNow matures and develops more use-cases, it will become the payments rail for money movement and even replace the ACH rails. We think financial institutions, businesses, and the retail industry will prefer a real-time payments system with real-time settlement at a lower cost than existing systems today.

Why does FedNow matter to financial institutions?
We believe that financial institutions, including Star One Credit Union, have been waiting for an instant payment solution for the past decade — a cost-effective solution for both financial institutions and the consumer. Consumers have migrated to fintech solutions such as Venmo and CashApp, leaving financial institutions out of the process. Real-Time Payments (RTP) is a real-time network, but the drawback is that you have to be in the network to send or receive funds. The cost of RTP is higher and can be a deterrent for smaller and mid-size financial institutions. That’s why FedNow is so important to the financial industry. It levels the playing field for all financial institutions regardless of their asset size and allows us to be competitive in the payment industry — and not lose transactions to the fintechs.

Star One Credit Union realized that our members were using these fintech applications and we wanted to own those payments. With FedNow we are able to do that. We own the relationship with our members. By providing the FedNow service, we own the transaction and the process as well. It was also important for us to know that FedNow was built by the Federal Reserve, which has been providing the ACH rails for more than 50 years for the financial services industry — and is one of the best and trusted rails in the industry. Although very efficient and cost effective, ACH is an older network that uses outdated technology.

The Federal Reserve built the FedNow service with state-of-the-art technology that will ensure greater speed, reliability, availability and security. Real-time settlement is important to Star One Credit Union and other financial institutions as it provides efficiency in the back office by making the reconciliation process easier. FedNow is also being offered through the Federal Reserve, which is a neutral party and will not try to monetize the service. FedNow will be the most cost-effective solutions in the financial services industry.

Instant payments have been a strategic focus for Star One Credit Union. We believe Fednow has the potential to change the payments industry in a very positive way moving forward, and we are excited to be part of that process and its future evolution. There will be many use-cases for FedNow that benefit various parts of the economy.

Access the ‘Compliance Hotline’
Your League-member benefits include the Compliance Hotline — providing exclusive access to dedicated compliance experts:

Using the above phone number and email address, you can gain access to a knowledgeable team that’s ready to address all your credit union’s compliance inquiries — promptly and efficiently. With the Compliance Hotline, you can proactively respond to impromptu questions and issues by getting clarity and insight on technical topics that normally slow you down. We want to help you unlock the full potential of your League membership by leveraging the resources and support you need to navigate the complex world of compliance effortlessly. We’re ALWAYS just a phone call or email away!

Additionally, other League-member compliance resources include:

  • ViClarity
  • CU PolicyPro
  • ComplySight
  • InfoSight
  • CU Store
  • Record Retention Guide
  • GRC Technology Solutions

For more information, email Lisa Quaranta.

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