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Friday, November 17, 2017

Real-time payments launch, American style

T he Federal Reserve's vision of real-time payment systems accessible to U.S. consumers and businesses alike is inching closer to reality. On Nov. 13, 2017, the first real-time payment was processed through RTP, a new payment system developed by The Clearing House. The exchange was between BNY Mellon and U.S. Bank. At least four other large U.S. banks – Citibank, JPMorgan Chase, PNC Bank and SunTrust Bank – are expected to start moving payments through RTP any day now, TCH said.

RTP – which TCH describes as "the first new core payments infrastructure in the U.S. in more than 40 years" – was a collaborative effort involving TCH's 25 owner banks and Vocalink. Vocalink, which is majority-owned by Mastercard, developed the technology that undergirds several existing real-time payments networks, including the U.K.'s Faster Payments Scheme.

In addition to moving payments, RTP is designed to support exchanges of payment-related data (for example, invoice and remittance documents) to support back-office reconciliations, as well as immediate confirmation notices that payments have been sent, received and settled.

TCH is hoping for near universal adoption of RTP, akin to the automated clearing house system and wire transfer networks like CHIPS and FedWire, by 2020. This is in keeping with a goal established by the Fed back in 2014 to have something approximating real-time payments universally available in the United States by 2020. A Faster Payments Task Force, set up by the Fed in 2015 that includes all manner of payment system stakeholders, has been evaluating various real-time payment system prototypes, including RTP.

"Real-time payments are now a reality in the U.S., and the RTP system is open to all U.S. depository institutions, no matter their size, and will be used by corporations and consumers looking to benefit from their efficiencies," said Steve Ledford, Senior Vice President for Products and Strategy at TCH.

"As an industry, RTP positions us like never before," said William S. Demchak, Chairman, Chief Executive Officer and President of PNC. "RTP will make everyday financial tasks such as paying bills, issuing invoices, making payroll or settling insurance claims faster, safer and more satisfying for businesses and consumers across the country."

Plus for U.S. businesses

Most, if not all of the leading providers of core banking solutions have been working on products and service that compliment RTP and similar initiatives. ACI Worldwide, for example, just introduced a service to help banks and credit unions quickly ramp up access to RTP so they can quickly begin offering real-time payments to business and consumer customers. "ACI's RTP Start Up program offers a host of options to support a quick on-ramp to RTP while managing investment with predictable costs for increased ROI options," said W.A. Proctor, Vice President at ACI.

There is significant market demand for faster payments capabilities in the United States, particularly among businesses. A 2016 survey conducted by the Association for Financial professionals found 62 percent believe faster payments will have a somewhat or extremely positive impact on their businesses.

Business Insider, in a recent analysis of RTP, said it's likely to prove popular. This should be the case particularly for businesses, the firm said, noting that "53 percent of merchants [represented in the AFP survey] believed faster payments would have a positive impact."

But the biggest impact may be that it places the United States on a more equal footing with competitors in other countries with real-time payment platforms. "Other leading global payments players, particularly Singapore and the United Kingdom, have long offered real-time payments platforms, putting the U.S. squarely behind and setting the scene for disruptive technology, like blockchain, to overtake legacy payment systems," Business Insider wrote. "Building an easily implementable system that will help the U.S. catch up – RTP is globally interoperable – could help fend off that disruption."

Cordray resigns from CFPB
Thursday, November 16, 2017

T aking an early exit as Director of the Consumer Financial Protection Bureau, Richard Cordray stated in an email to employees on Nov. 15, 2017, his intention to resign by the end of the month. His term was set to expire in July 2018. Since he took the helm as a President Obama appointee, Cordray's sweeping authority and the CFPB's constitutionality itself have been called in question in some sectors and supported in others.

Authorized by the 2010 Dodd-Frank Act, the CFPB was established as an independent agency in July 2011. It was created to protect consumers in the financial sector in the aftermath of the financial collapse of 2008 and ensuing Great Recession. The bureau’s jurisdiction spans banks, credit unions, payday lenders, debt collectors and other financial companies operating within the United States.

In the email, Cordray wrote, "Together we have made a real and lasting difference that has improved people's lives, notably: $12 billion in relief recovered for nearly 30 million consumers" and "giving people a voice by handling over 1.3 million complaints that led to problems getting fixed for vast numbers of individuals, and creating new ways to bring financial education to the public so that people can take more control over their economic lives."

Following Cordray’s resignation, Jason Oxman, Chief Executive Officer of the Electronic Transactions Association issued this statement: "We thank Director Cordray for his service at the CFPB and wish him well in his future endeavors. We have appreciated his willingness to listen to input on our shared goal of helping consumers achieve their financial goals. We look forward to working with the White House, Congress, and the CFPB to ensure a regulatory environment that encourages innovation."

Contentious term

During it brief history as an agency, the CFPB has faced scrutiny. Below are excerpts from The Green Sheet and elsewhere describing recent agency developments and actions taken:

Successor uncertain

Under the current structure, the CFPB director is appointed by the president to serve a five-year term. According to Raj Shah, Principal Deputy Press Secretary at the White House, the Trump administration will name an acting director, as well as a permanent choice to fill Cordray's position "at the appropriate time."

A decision on an interim director could come swiftly; otherwise, David Silberman, the agency's second in command, will take over under current provisions. The nomination of a permanent director is expected to take longer.

Visa to digitalize mass transit
Tuesday, November 14, 2017

V isa Inc. unveiled on Nov. 13, 2013, Visa Global Transit Solutions, a new service designed to create a frictionless mass transit experience. Program organizers expect the service to simplify debit, credit and prepaid acceptance at turnstiles and inside bus readers. Technology companies and transit operators saw live demos this week in London; additional events are planned for New York, as well as for locations in Dubai and Singapore, Visa representatives stated.

Michael Lemberger, Head of Products at Visa Europe, said Visa is working with Transport for London (TfL) to improve public and private transportation. The companies plan to leverage worldwide contactless payments, which account for 40 percent of Europe's in-store payments. "We want to make the transportation experience faster, easier and more secure whether someone is traveling by car, flying on holiday or taking public transportation to work," he said. The effort appears to be working: TfL has logged more than 1 billion Visa contactless transactions and expects to see more electronic payments across all transportation venues in the future, Visa noted.

Shashi Verma, Chief Technology Officer at TfL, said pay-as-you-go passengers from more than 100 countries use mobile devices and contactless cards on London's transit systems. Their transactions comprise 40 percent of overall mass transit volumes. "To get to this point, a lot of things needed to change about how the payment industry worked, including the creation of new payment rules," he stated. "Without our close partnership, we would not have seen the huge benefits to customers that contactless ticketing has already delivered in London."

Anti-fraud, back-office capabilities

Additional value-added services, including fraud management and back-office tools, will be added to Visa's Mass Transit Transaction framework, Visa representatives stated. Built to manage multiple types of payments and transportation methods, the platform contains the following attributes:

Cashless Cities Report authors additionally noted that urban populations are expanding across the globe. They see greater growth potential in "digitally mature" cities. Bucharest recently installed contactless payment terminals in all its metro stations; other cities are adopting similar initiatives to improve efficiencies and scale, they observed. "With the pace of this digital change accelerating around the world, national and municipal governments are embracing smart technology and cashless payment solutions," the authors wrote. The report is available at .

Deloitte honors fastest growing tech companies
Monday, November 13, 2017

A number of companies with links to the payments industry earned Deloitte 2017 Technology Fast 500 awards. The 23rd annual list honored 500 companies headquartered in North America. Selection was based on technology innovation, entrepreneurship and rapid growth. Companies with base-year operating revenues of $50,000 stemming from proprietary product sales in eight categories, and $5 million for the current year, were ranked on percentage growth during the 2013 through 2016 period.

Toast tops in payments

Boston-based Toast, an all-in-one restaurant technology platform launched in 2013, earned the top spot among payments industry players, ranking third with growth of 31,250 percent. "Our team is thrilled to be recognized as one of the fastest growing companies in the U.S. and will continue to deliver on our promise to be obsessed with customer success," said Chris Comparato, Chief Executive Officer of Toast.

Other Deloitte award winners focused on retail and enterprise offerings included the following, in order of ranking:

About his company being honored for the second time, ShopKeep CEO Michael DeSimone said, "As the operating environment for businesses continues to be reshaped by fast-paced advances in technology, SMB merchants must be in position to evolve in order to meet the expectations of their customers, help them grow, and be successful. We remain committed to equipping our customers with the sophisticated business management capabilities and insights they need to compete in the modern business landscape."

TouchBistro CEO Alex Barrotti credits the company's ongoing commitment to restaurant technical innovation through development of its innovative app. "The solution we have developed and continue to enhance effectively works as the hub of a restaurant's operations, improves the customer experience, and increases table turns," he said.

Net Element CEO Oleg Firer credits the company's progression to organic growth in its North America Transactions Segment, specifically the success of its Unified Payments brand, which focuses on value-added payment acceptance solutions for small to midsize businesses (SMBs) in the United States.

Security companies score big

Security companies such as password and online identity management firm Dashlane Inc. and Knowbe4 also gained recognition. Here are the top five:

"The relentless push by cyber criminals and the potential harm from ransomware, phishing attacks, CEO fraud, and other forms of social engineering can be substantial, costing billions of dollars," said Stu Sjouwerman, CEO of security awareness training provider KnowBe4. "CISOs and IT managers recognize the effectiveness of the KnowBe4 platform to help them reduce human error and reduce their social engineering attack surface."

Mobile and digital authentication provider Payfone Chief Financial Officer Tom FitzSimmons said that being recognized is validation of the "team's hard work and passion for building a new paradigm for identity authentication -- one that allows enterprises to protect their users while also delivering the best possible user experience."

In tabulating the winners, Deloitte noted that software companies dominated, with 293 software companies making the grade this year. Among the companies listed, 66 percent were privately held, with 17 of the top 20 being private; 34 percent were public entities. According to Deloitte, 70 percent of the companies listed have received venture capital and/or private equity funding at some point.

Protect corporate sites before the holidays, experts warn
Monday, November 13, 2017

S ecurity experts are advising companies to secure corporate networks ahead of the holiday season, when employees may be more susceptible to phishing scams and online fraud. A new report published Nov. 2, 2017, by Adobe Systems Inc., predicts a 13.8 percent increase in online shopping this holiday season, with 80 percent of ecommerce occurring at major retail sites. The study, Holiday Ecommerce To Hit Record $107B in 2017; Mobile Will Lead in Visits, is based on metadata from Adobe Analytics.

Mickey Mericle, Vice President, Marketing and Insights at Adobe, expects to see deep discounts, as retailers compete for market share. "We predict the biggest retailers with wide selections, easy shopping experiences and free shipping, to drive online holiday growth this year," she stated.

Christian Lees, Chief Information Security Officer at InfoArmor Inc., said employees will be more susceptible to phishing and malware attacks during the holidays, as criminals try to steal their credentials to gain access to corporate networks. "Considering the tremendous amount of time individuals spend at work, naturally some of our personal behavior weaves its way into our corporate environment," he stated. "For example, mailing lists and 3rd party site enrollment tends to peak during holiday season, often due to retailer campaigns, targeting marketing and consumer behavior."

Protect networks, corporate credentials

Individuals who use their corporate credentials and work email accounts to shop online are exposing their companies to outsider threats, added Byron Rashed, Vice President, Global Marketing at Advanced Threat Intelligence at InfoArmor. Most credential breaches occur at third-party sites, where consumers use corporate emails and passwords to create accounts. By using a corporate password, these employees unwittingly give threat actors the "keys to the kingdom," he noted.

Noting that threat actors can be cunning, Rashed recommended implementing the following precautions to protect employees and networks from outside threats and data breaches:

Rashed emphasized the need to protect mobile, tablet and laptops passwords, especially those that can be easily accessed on a connected device. "An obvious potential danger is in the latest version of iOS where "keychain" can be easily accessed through settings," he stated. "The user names and passwords are available in this feature. If the device is lost or stolen and no passcode protection is on the device, all the user's accounts within keychain are at risk."

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