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Friday, March 15, 2019

Fed prepares for triennial study, evaluates ACH road map

The Federal Reserve Board disclosed March 14, 2019, that it will invite select financial institutions and payments industry stakeholders to participate in its seventh triennial Federal Reserve Payments Study. The independent research, to be conducted by McKinsey & Co. and Blueflame Consulting LLC, will separately survey banks and processors to assess banking and payment card processing trends.

The study's executive sponsor, Mary Kepler, senior vice president of the Federal Reserve Bank of Atlanta, said the Federal Reserve will publish aggregate estimates, and individual survey data will remain strictly confidential. Analysis will include developing trends in in the number and value of payments made with checks, cards, electronic transfers, and various alternative payment initiation methods and systems over the past 12-month period, she stated.

"The U.S. payments system has changed dramatically since 2000, and the Federal Reserve Payments Study has served as an aggregate benchmark for the payments industry, policymakers, and the public," Kepler said. "Robust industry support and respondents' willingness to participate is paramount to our ability to publish timely, accurate, and high-quality results."

Faster payments, settlements

In a 2018 town hall meeting, Esther George, president of the Federal Reserve Bank of Kansas City and executive sponsor of the Federal Reserve System's Payments Improvement Efforts, pointed out that technology is changing. Emerging technologies enable people to pay each other instantly. However, many of these transactions occur outside the banking system, without the security that a strong regulatory framework can provide.

Noting that progress to date has been a result of active collaboration, George called for payments industry stakeholders to participate in addressing the mismatch between faster payments and slower settlements. Interbank settlement for alternative payments schemes can create delays and pose risks to banks, George stated. A nationwide, seamless way to send and receive funds would solve these issues.

"It makes sense for us to look at how changes in the settlement process can encourage faster payments and enable everyone to gain the benefits of a more efficient system," she said.

ACH settlement road map

Recent developments affecting the automated clearing house (ACH) system reflect the complex realities of aligning faster payments and faster settlement. The ACH Network is readjusting its implementation schedule, according to NACHA, the governing body for the network.

On March 12, NACHA revised the schedule for same-day clearing and settlement of ACH transactions from the original date of Sept. 18, 2020 to March 19, 2021. NACHA attributed the delay to the Federal Reserve Board, noting that the ACH Network is waiting for the Fed board to approve procedural changes. The ACH processed 23 billion payments in 2018, its highest volume in a decade. In February 2019, ACH payments volume exceeded 100 million transactions and $1.9 billion in payments, a 7.2 percent increase over the same period last year.

Jane Larimer, chief operating officer at NACHA said these milestones indicate the ACH Network is a vital part of the American economy. "The nation's consumers and businesses are clearly expressing their preference for electronic payments and the ACH Network will continue evolving to provide the services they need," she said. end of article

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