Below you will find some of our recent postings from LinkedIn.
FedNow Settlement Gap
FedNow creates unanticipated financial impacts to banks as the result of an end-of-day gap. This gap impacts, risk weighted assets, return on asset ratios, capital requirement calculations and possibly other considerations. The attached presentation (see Endeavors, Presentations, FedNow Settlement Gap) describes the gap and shows the accounting needed to reconcile the bank’s Fed account. Other electronic payments do not have a settlement gap.
Private Sector Agreements Require:
Agreements will be required between the Fed and every bank using its FedNow service. Today however, standard legal agreements are not planned for faster payments services outside of the Fed. Ubiquitous adoption also requires standard agreements among parties using private sector exchanges. The lack of standard agreements will create uncertainty and adoption delays. Today In the U.S., there is only one private sector, payments rules organization that does not also offer proprietary payment services and therefore is the only one uniquely positioned to provide standard agreements. What are your thoughts on NACHA as the faster payments rules provider for private sector instantaneous payments?
Risks Created by Real-Time Directories:
One of the support requirements for a ubiquitous, faster payments, credit push payment system is one or more directories to push the payments to the correct banks and bank accounts. These directories also need to be real-time which means that maintenance on them needs to be real-time. The risks associated with performing real-time maintenance in a real-time payment environment with irrevocability is not well understood but needs to be before we jump headlong in full support of ubiquitous, real-time, credit push payments. Has anyone performed an analysis to identify these risks and determined how to avoid/mitigate them?
Ubiquitous, Real-Time Directories:
One of the support requirements for a ubiquitous, real-time, credit push payment system is one or more directories to push the payments to the correct banks and bank accounts. These directories also need to be real-time which means that maintenance on them needs to be real-time. The risks associated with performing real-time maintenance in a real-time payment environment with irrevocability is not well understood but needs to be before we jump headlong in full support of ubiquitous, real-time, credit push payments. Has anyone performed an analysis to identify these risks and determined how to avoid/mitigate them?
Instantaneous Business Payments Require Positive ROI:
Faster payments, real time payments, instantaneous payments; these terms are used to describe various forms of credit push payments. In the post-pandemic era, businesses may have an even elevated reluctance to implement these payments. Given the profit losses during the pandemic, businesses are likely to prioritize profit recovery post-pandemic. New revenue generation while keeping expenses low! Not the ideal environment for risky investments in overhead expenses, e.g. payments, without a predictable ROI. Lacking a clear economic incentive, the implementation rate of credit push payments is likely to lag even more significantly. Perhaps another payment option is needed to help businesses.