By Dale S. Laszig
DSL Direct LLC
I've been covering faster payments for The Green Sheet for a while now, getting insights from ISOs, analysts and third-party service providers on how to make interbank funds transfers faster and more efficient. I didn't fully appreciate the need for high-speed communications until the night I tried to watch Netflix, and my video stream kept buffering. Then it got personal.
I called my Internet Service Provider and spoke to Beth, who reset my modem, ran some speed tests and assessed my technical issues. That's when I learned that video streaming requires a higher processing speed. My 70 mbps subscriber level was more than adequate for email, social media and posting articles on the web, but not enough for movie watching, Beth explained. My subsequent upgrade to 250 mbps has enhanced my smart TV viewing and Internet browsing.
The experience got me thinking about secure, high-speed connections in other areas of my life, like healthcare, bill payments and shopping. Advanced technologies are transforming our lives and businesses, creating a virtual world where we can watch movies, play games and buy things. In a few years, we've gone from talking about connected commerce to talking about faster commerce. For many of us in the payments value chain, it's not happening fast enough.
What's slowing down faster payments? It's certainly not technology: apps like Zelle and Venmo have been facilitating instant peer-to-peer transactions for years. It's not government: the U.S. Federal Reserve Bank created the Faster Payments Task Force in 2015 and recently formed the Faster Payments Committee to "modernize our country's payments system and allow everyone – providers, consumers, businesses, and more – to benefit from faster payments."
Getting different players and competitors to work together is not easy, but major initiatives can be mobilizing. PCI compliance and EMV migration require payments stakeholders to put aside differences and protect our industry from bad actors. In a similar way, building a faster payments network will require competing banks and third-party service providers to find common ground.
"Building a real-time payments network means redesigning an entire ecosystem and multi-trillion-dollar market," said Travis D. Dulaney, CEO and founder at PayFi. "It means providing liquidity by transforming risk-based models to funds movement models and moving from proprietary to open source systems. 30 years ago, banks began outsourcing services to companies like FIS and Jack Henry and their core systems are all proprietary."
Peter Gordon, co-founder at Payment Relationship Management, said, "Large banks understand that the current payment system infrastructure is broken, like our roads and bridges in the United States. Creating new rails that would allow banks to move money from one bank to another efficiently is driving the change."
Ever since The Clearing House's owner banks connected to the Real-time Payments network, faster payments initiatives have been in play, and numerous parties are making their voices heard, Gordon noted. Community banks want TCH and the Fed to be inclusive and serve their needs. Retailers and retail trade groups like the National Retail Federation want the Fed to create a real-time payments network, so they can get paid faster. These projects will take years to develop, he added.
Gordon had visited the Federal Reserve the day before our interview and predicted that 2019 will be a defining year for connectivity. TCH will continue to build its network and supporting applications will provide more visibility into accounts and billing statements. And the real magic will happen around 2020, when banks use data provided by the new rails, he stated.
"The Fed did a great job in assembling the Faster Payments Task Force," Dulaney said. "Consumers and large and small companies are collaborating by choice, not by government mandate, to connect multiple endpoints and build a better banking network."
Dulaney went on to note that whenever we transact online, we enter a virtual reality made of multilayered, integrated technologies. While this smarter, faster virtual world remains a work in progress, I'll plan to keep Beth on speed dial.
Dale S. Laszig, senior staff writer at The Green Sheet and managing director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at email@example.com and on Twitter at @DSLdirect.
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