Faster
Payments Tracker
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August 2016
Banking On A Smooth
Same Day ACH
Rollout?
R3CEV adds three companies,
Toyota, Absa Bank and Bradesco,
to ledger consortium
Circle receives $60 million in funding
from IDK-led group
Faster Payments processes 1.24 billion
payment transactions worth £1.104 billion
More than 20 proposals for faster payment
technology under review by the Fed
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Faster Payments TrackerTM
What’s Inside
The U.S. is officially in the homestretch of the journey to Same Day ACH. Although Faster Payments are a
much-anticipated addition to the nation’s financial ecosystem, their impending adoption is raising questions
among finance, tech and government players. From fraud to fees, it was speculation into the unknown that
defined the last month’s push toward Faster Payments.
For this month’s Faster Payments Tracker cover story, powered by NACHA, PYMNTS caught up with Steve
Kenneally, Vice President of the American Bankers Association, to get the inside scoop on what this transition
means for the financial world.
Also included in August’s tracker are news highlights from throughout the Faster Payments space.
Here’s what’s happening around the world of Faster Payments
As currency exchanges become increasingly digital and fluid, fraud is becoming a growing concern for
consumers, businesses, governments and FinTech providers.
Although public worries about the security of Faster Payments were exacerbated by the SWIFT heist, Marianne
Crowe, VP of payment strategies at the Federal Reserve Bank of Boston, stated that the Fed will not alter its
plan for shifting to real-time transactions. According to Crowe, security has been a primary focus of the Fed
prior to the SWIFT case, and will remain so throughout the transition.
In addition to fraud, the focus has been on fees, as many financial institutions weighed the pros and cons of
charging extra for same-day service.
Many banks are considering tacking fees onto their faster payments offerings as they offer new, enhanced
services .This strategy could cause financial institutions to lose money and customers, however, as more feefree, real-time FinTech payment solutions hit the market each day. How to balance cost of delivering services
with the goal of gaining market share remains a market challenge.
Check out the Tracker’s News section to read more about what is trending around the world of Faster Payments.
© 2016 PYMNTS.com all rights reserved
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“
...technology moved very fast,
and people realized that real-time
payments were coming...
”
Banking On A Smooth Same Day ACH Rollout?
Phase One of Same Day ACH will officially launch in the U.S. on Sept. 23, but the initiative has been a top
priority of Steve Kenneally, Vice President of the American Bankers Association, since 2014. It was then that
NACHA proposed the shift to settling three times a day, five days per week, to give consumers and businesses
access to more efficient transactions.
While the concept of Same Day ACH seemed somewhat futuristic when it was first introduced, Kenneally
explained in an interview with PYMNTS, the industry quickly got on board with the idea of speeding up the
nation’s digital financial ecosystem.
“I think that when it was proposed a few years ago, the concept of real-time payments was out there, but it
wasn’t as real,” Kenneally said. “But technology moved very fast, and people realized that real-time payments
were coming, whether they were internet-based or speeding up the legacy system. I think the whole industry
perspective shifted over the past couple of years to realizing, ‘hey, we need to get something done on faster
payments.’”
And get something done they did. In just a few weeks, all U.S. banks will be required to accept Same Day ACH
payments, with the option to originate them as well. PYMNTS caught up with Kenneally on the cusp of this
landmark shift to discuss what it means for financial institutions, customers and the future of digital payments.
Final steps toward Faster Payments
With mere weeks to go until the kickoff of the first phase of Same Day ACH, banks are wrapping up their
preparations. According to Kenneally, the majority of work being done at this point is related to software upgrades
and network testing. Most financial institutions, he expects, are aiming to be set up as soon as possible.
© 2016 PYMNTS.com all rights reserved
3
Cover Story
“You don’t want to be ready Sept. 22, you really want to be ready Sept. 1,” he explained.
While most institutions are closing out their Same Day launch strategies, there are still a few eleventh hour
decisions that need to be made.
One of the biggest choices most financial institutions have yet to make is whether or not they want to originate
payments in addition to accepting them. Kenneally explained that the cost of originating Same Day payments
may not be in the budget of some smaller banks just yet, while some bigger institutions may choose to offset
the investment by offering the service for an additional fee. Although it’s up to individual institutions to decide
whether they have the resources to originate, Kenneally expects most small and midsize operations to hold off
for the time being.
“I think primarily you’ll be seeing the larger banks that see originating
these as a profit center moving forward faster to be able to originate
these, and that’s got to mean they’re going to have to do more
software development in a shorter period of time, but they’re doing it
because they see a business case there,” Kenneally explained. “They’re
looking at offering Faster Payments as an enhanced value product to
their customers. We’re going to be settling now, eventually, three times
a day Monday through Friday, and there’s a value for commercial and
consumer customers.”
According to Kenneally, the main incentive behind offering origination
is interbank competition. After all, customers seeking the most
faster payments features, whether for business or personal use, may
gravitate toward banks that offer origination services. He expects
most financial institutions to charge extra for Same Day origination,
though rates have yet to be determined.
“
...they’re going to have
to do more software
development in a
shorter period of time,
but they’re doing it
because they see a
business case there.”
“The banks are going to decide how much they think it’s worth, and the
customers are going to decide indirectly for the banks what fees they
think it’s worth,” Kenneally said.
Leveraging a legacy system
One central reason Kenneally expects Sept. 23 to go smoothly is that the ACH network is already being
used by banks and consumers.
© 2016 PYMNTS.com all rights reserved
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Cover Story
“It’s providing an enhanced service that everybody is already familiar with, it’s not a brand new payments
system where people have to figure out, ‘How do I use this?’ ‘Do I know if the person I’m sending it to is going
to accept it?’” Kenneally explained. “The cool thing about that is that the infrastructure was already in place,
we didn’t have to introduce a lot of new rules for any new connectivity, because all the banks were already
connected. That’s the value of using a legacy system.”
Because Faster Payments is being implemented on an existing
ecosystem, the first phase of Same Day’s launch won’t feel like a major
dive into the unknown, but rather a natural next step toward ubiquitous
digital financial efficiency, Kenneally said.
“This will raise the threshold for a legacy payment system. This is a step
forward, but it’s not a leap from what they’re offering now. I think this
would be a complementary system to any real-time payments system
that comes into effect,” he explained.
Because Same Day service is a straightforward expansion of the
current ACH payment process, Kenneally said, “it’s evolutionary, not
revolutionary.”
“
...Kenneally expects
Same Day ACH to be
the most prominent
faster payments
technology for the
foreseeable future.”
“It’s a small step – but an important step – in improving the payments system in the U.S.,” he said.
Looking beyond September
Down the line, Kenneally expects competition between financial institutions to be a major force behind the
evolution of Faster Payments, especially when it comes to originating transactions.
“If the adoption is fast for the banks that are offering origination, I think you’ll see a lot more banks jump in
and start offering it as a product. Just from a comparative point of view, they’re going to have to offer it,” he
said. “So I think it’ll be interesting to see how quick consumer and commercial customer adoption is, and see
if it meets NACHA’s predictions.”
Kenneally noted that NACHA expects just less than 10 percent of their ACH volume to be Same Day after
the rollout of all implementation phases, with most consumers continuing to utilize traditional overnight
ACH service.
“That’s really interesting because that’s showing that there’s not a super demand for faster – really fast –
payments in the ACH world,” he said.
Because of this, Kenneally expects Same Day ACH to be the most prominent faster payments technology
for the foreseeable future. Other solutions, like the blockchain, could become a priority further in a few years,
he said.
© 2016 PYMNTS.com all rights reserved
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Cover Story
“I think blockchain technology and money transfers are very, very interesting right now, but they’re not going
to happen right now on a broad scale for banks in the U.S. – it’s something that’s going to happen down the
road,” he explained.
For now, Same Day ACH represents the first tangible step toward the future of faster payments, and its
reception will undoubtedly inform the industry’s next moves.
“That’s kind of the neat thing about Same Day ACH. It’s not a tremendous leap forward in the world of faster
payments, it’s not a real-time payment, but it is something that’s definitely going to happen, and it definitely is
going to have ubiquity of all the financial institutions,” Kenneally said.
© 2016 PYMNTS.com all rights reserved
6
News
NACHA
NACHA on the hill: inside Same Day ACH
The launch of Same Day ACH, set for Sept. 23, is fast approaching. As the U.S. enters the homestretch,
consumers, banks corporate treasurers and government officials are all ramping up preparations. PYMNTS
recently unpacked exactly what this impending shift means, from the private-public collaborations required to
get it off the ground to what people can expect from the future of faster payments.
Fed
What the launch of faster payments may mean for fraud in the U.S.
The launch of faster payments in the U.S. has many wondering if speedier transactions will be more
susceptible to fraud. According to Marianne Crowe, VP of payment strategies at the Federal Reserve Bank
of Boston, this concern is one of the Fed’s top priorities. Crowe noted the Fed’s strategy for migrating to a
faster network will remain unchanged despite the SWIFT heist, as the agency has been focusing on safety and
security since the start of the transition.
Fed acknowledges roadblocks in ISO 20022 push
The Federal Reserve is advocating for the establishment of the ISO 20022 global payments messaging
standard. This step, which industry experts believe could help improve cross-border B2B payments, is still
being reviewed due to potential issues, however. Currently, the biggest challenge is a lack of understanding
about the messaging standard, according to reports from the AFP Treasury Advisory Group Meeting. NACHA
offers insights to how ISO 20022 can be integrated into the ACH Network today, and how it is educating and
supporting the industry.
ClearXchange/Early Warning
Early Warning adds Capital One, Chase, Wells Fargo to P2P network
Capital One, Chase and Wells Fargo have been empowered by Early Warning’s clearXchange network to accept
real-time payments. Each institution will support the enablement of all of its customers to send and receive
real-time payments via clearXchange over the next few months.
U.S. Bank’s real-time P2P payments now fee-free
U.S. Bank will start offering real-time payments fee-free through its clearXchange network. The service, which
launched at the start of 2016, only requires users to have a mobile phone number or email address in order to
send money securely through the network’s mobile app.
© 2016 PYMNTS.com all rights reserved
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News
Bottomline
Bottomline releases Bottomline Universal Aggregator
Cloud-based payment provider Bottomline Technologies released its Bottomline Universal Aggregator. The
solution allows multiple payment service providers to facilitate transactions, and was created for use in
corporations, banks, non-financial institutions and governments, as it gives them a comprehensive interface
into global payment structures.
Deloitte
Deloitte constructing global 5-second payments portal
Deloitte recently announced it will be partnering with Stellar to develop a cross-border payments platform. The
platform will take a two-sided approach to international payments, placing a focus on both consumers and
businesses. As of now, the solution is being called “Deloitte Digital Bank.”
Blockchain
Toyota, Absa Bank and Bradesco join R3CEV consortium
Every month, R3CEV is adding new companies and banks to its distributed ledger consortium, the aim of
which is to promote inter-company collaborations that can develop blockchain technology for the financial
market. Toyota (which is the first automotive financial services provider to join the consortium), Absa Bank and
Bradesco have joined the consortium.
Abra teams up with Synapse on blockchain app
Blockchain startup Abra recently announced its partnership with product development firm Synapse. Together,
the two organizations will work on an app that will allow Abra’s existing digital wallet to make purchases and
store money without the assistance of a third-party financial program.
Mizuho Finanical Group and IBM will test blockchain for use in virtual settlements
Japanse company Mizuho Financial Group will join forces with IBM to test the effectiveness of blockchain
technology for use in settlements with digital currency. According to a press release, Mizuho wants to “explore
how payments can be instantaneously swapped, potentially leading to new financial services based on this
rapidly evolving technology.”
Baidu announces funding of Circle Internet Financial
Chinese search engine Baidu announced its funding of blockchain company Circle Internet Financial, which
has offices located in the U.S. and Ireland. This marks Baidu’s first entry into the FinTech space, as well as
Circle’s debut on the Chinese P2P market. Although bitcoin has yet to be officially recognized by the Chinese
government, Baidu hopes its investment will put it ahead of the curve.
© 2016 PYMNTS.com all rights reserved
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News
More Faster Payments News
Should faster come with a fee?
With the launch of Faster Payments fast approaching in the U.S., many banks are weighing the pros and cons
of tacking fees onto their real-time offerings. While incorporating charges may be an attractive option to banks
that are looking to reduce costs on their end, those who choose to add fees run the risk of being eclipsed by
fee-free FinTech startups. Taking a holistic look at the customer benefits of using faster payments makes
sense in today’s environment, which includes assessing a bank’s offerings versus FinTech’s offerings for
functionality, value and price.
© 2016 PYMNTS.com all rights reserved
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