Federal Reserve releases strategies for faster payments

The report lays out four options for building a faster payment system: evolving the existing PIN debit infrastructure, which is currently used in retail stores and at ATMs, to enable real-time payments; using common protocols and standards to facilitate the clearing of transactions over the internet; building a new payments infrastructure that would build on existing technology and only have limited uses; or building a new payments infrastructure that would process a wider range of transactions.

The report states that the four options will be studied further. The Fed said that early in 2015 it plans to establish a task force on faster payments, which will get input from stakeholders, and then by 2016, identify one or more approaches for implementing faster payments. A separate task force will be established to study payment-security issues.

The Clearing House, a payments company and trade group representing 24 of US commercial banks, laid out its own vision for building a faster payment system in 2014. Clearing became mandatory for much of the USD 690 trillion global derivatives markets after the 2007-09 crisis, shifting risk from Wall Street banks to clearing houses, which are market operators that stand between buyers and sellers. But key players such as JP Morgan Chase and Blackrock have been pointing out the huge impact should a clearing house collapse, demanding tighter oversight and greater capital buffers.

In December 2014, NACHA released a Request for Comment (RFC) on Same Day ACH. The RFC outlines a proposal for new, ubiquitous clearing and settlement options to move virtually any ACH payment faster, expanding upon traditional ACH functionality. NACHA`s plan to deploy Same-Day ACH means that banks would be required to make funds available to consumers and businesses on the same business day provided that a transaction was flagged as Same-Day ACH.