The recent U.S. Faster Payments Council (FPC) Spring Conference offered an opportunity to hear from industry leaders about key developments in areas such as interoperability, fraud prevention and use case trends. A highlight of this virtual event was a discussion with Nick Stanescu, senior vice president and FedNow business executive and Steve Ledford, The Clearing House’s senior vice president for product and strategy, about their organizations’ instant payments infrastructures.
Priority #1: Widespread Adoption
While The Clearing House’s RTP® Network and the FedNowSM Service will compete when the FedNow Service launches in 2023, both Ledford and Stanescu stressed the importance of collaborating to drive successful adoption of instant payments within the U.S. market.
Stanescu highlighted that industry engagement and inclusion through the FedNow Community have helped shape the FedNow Service development process. Recently, more than 120 organizations joined the FedNow Pilot Program, which will be a key source of engagement. Participants will provide input into the overall user experience and participate in testing to ensure the service is ready for general availability. Stanescu noted that the program includes a diverse group of financial institutions and service providers as well as connection types, settlement arrangements and experience levels. He added that a broader ecosystem participant program will be added later this year.
Collaboration and Compatibility
Ledford and Stanescu also spoke of the recent collaboration between their organizations to align messaging standards and optimize compatibility of their services. Both the RTP Network and the FedNow Service are using the ISO 20022 standard for message formats. Aligning to this internationally accepted standard promotes routing interoperability, end-to-end efficiency of payments and future innovation.
Ledford and Stanescu agreed that their organizations’ implementations were well aligned for the common message flows and especially for core message flows such as credit transfers and request for payments. Some discrepancies reflect the unique features and roadmaps for each service; others were noted as gaps that the organizations will continue to evaluate for opportunities to close.
Getting Ready for Instant Payments
Ledford and Stanescu also agreed that the time to start planning is now. As a starting point, Ledford recommended that banks and credit unions ask themselves, “How can I make my existing services better?” as well as to consider how instant payments fits within their organization’s digital strategy. He cautioned that getting ready for implementation might take longer than anticipated. Ledford encouraged financial institutions to reach out to their third-party service providers, which could help them with integration.
Stanescu offered a three-step approach, starting with identifying an organization’s instant payments opportunities through a review of its business plans and needs. Next, review systems and process for instant payments readiness. He advised that financial institutions should not underestimate the implications of 24x7x365 processing. Finally, he encouraged financial institutions to share their implementation plans with service providers and key customers and learn more about their plans and needs.
For more on instant payments preparation, explore the Federal Reserve’s Instant Payments Journey series (Off-site), an educational roadmap beginning with the basics of faster payments and progressing on the path toward eventual adoption.
The FPC is an industry-led membership organization whose vision is a world-class payment system where Americans can safely and securely pay anyone, anywhere, at any time and with near-immediate funds availability. The organization encourages a diverse range of perspectives and is open to all stakeholders in the U.S. payment system. Both the Federal Reserve and The Clearing House are FPC members.