It looks like this faster payments thing is going to happen after all.
When the Federal Reserve floated the idea of faster payments in the U.S. in 2013, it seemed like a distant dream, The Fed itself announced a 10-year time horizon.
But over the past week, proposals have been coming in from the companies that comprised the steering committee of the Fed’s task force – more than 20 so far from a veritable Politburo of payments poombahs. Yesterday saw the proposal from Dwolla announced, and this is significant because Dwolla actually operates a realtime payments network.
The specifics of the 160-page proposal are not public, and won’t be for probably another year, but Dwolla shared a bit of its vision and what it sees coming out of the broader initiative. “We’ve taken our experience with BBVA and looked at the success of putting an application layer to ACH,” Dwolla CEO Ben Milne told Bank Innovation.
The steering committee generally have been putting forward iterative ideas to fill gaps in realtime payments, said Jordan Lampe, Dwolla’s chief policy officer. “The Fed brings everyone together. Our role is advisors, as someone who operates [in faster payments] in the market today.”
Questions remain. How will multiple realtime payment networks interoperate? Who’s going to regulate this? Is a directory or manual needed? Dwolla likely arrives at a resounding “yes” for this last point, having written one for its ACH product after painful experience. Milne sees faster payments as a revenue opportunity for the industry and a shift away from the status quo.
“What we’re seeing is a privatizing of the industry,” he said. “Banks settling payments through ACH in four or five years may be doing it through a non-Fed entity. This represents substantial new market opportunities. It demonstrates how much the Fed values inclusion.”
When will realtime payments be ubiquitous in the U.S.? When will the various realtime islands join to form a continent?
“The Fed wants to do faster payments quickly,” Lampe said. “Apple Pay and bitcoin have shown them this is already happening.” In early to mid-2017, the assessments and proposals will become public, Lampe said — “8 to 10 months out.”
And Lampe sees the industry shifting and FIs talking about collaboration – and listening. “Talking about the ROI of realtime is old,” he said. “The new way is to talk about the opportunity cost of not doing it.”
It’s been a long road for Dwolla since it began work with the Fed in 2014, but overall, quite a positive one.
“The process coming to a head is leaving us more optimistic than when we started,” Lampe said.2 - Readers Like This Post