Payments Exchange

Federal Reserve to Study Payments Fraud and Security Vulnerabilities

As announced earlier today, the Federal Reserve will begin work this month on a new study that will measure fraud and associated costs in the U.S. payments system and identify the causes and contributing factors to fraud. The study is part of the Federal Reserve’s ongoing effort to improve and support payment security throughout the industry, as outlined in the Federal Reserve Next Steps in the Payment Improvement Journey paper released last year.

The Boston Consulting Group (BCG), a global management consulting firm, will conduct the study, which is expected to be completed in four to six months. The study will systematically and objectively measure payment fraud and identify and provide insight on payment security vulnerabilities. The Federal Reserve expects the results of the study will help inform its ongoing collaboration with the industry to enhance end-to-end payment security. For more information, read the press release in its entirety.

“The vast number of participants and complex nature of the payments industry make it challenging to determine where the greatest opportunities exist for significantly mitigating fraud,” said Ken Montgomery, the Federal Reserve’s payments security strategy leader and chief operating officer of the Federal Reserve Bank of Boston. “We hope to bring greater insight to the challenge with a comprehensive view of payment fraud data and payment security vulnerabilities that will help inform next steps for ongoing industry collaboration.”

BCG was chosen through a competitive bidding process that considered a number of factors including, expertise, ability to conduct an independent assessment and proposed assessment approach.

Stay tuned! The Federal Reserve expects to initiate new collaborative industry work groups to analyze payment fraud and security vulnerabilities, assess potential approaches to mitigate them, and identify misalignment of incentives that may hinder progress.

Enhanced FedPayments Improvement Community Puts you in Control

We believe that industry collaboration with diverse payment stakeholders is paramount to the success of the Federal Reserve’s payments improvement initiatives. Our commitment to stakeholder engagement is what led us to create the FedPayments Improvement Community back in 2015, and remains the driving force behind the enhancements we’re introducing today. As first described in Federal Reserve Next Steps in the Payments Improvement Journey (PDF), the enhanced FedPayments Improvement Community aims to provide opportunities for all stakeholders to engage in our full portfolio of payments improvement initiatives.

To better help you take advantage of the improvements, here is a summary of the changes and the actions you can take as a new or existing member to get the most out of the enhanced FedPayments Improvement Community:

What’s Changing?

  • We will collect information about your industry segment, your role, and payment system improvement topics and initiatives on which you would like to engage
  • Selecting your areas of interest will allow you to engage with us when and how you wish, as well as give you the opportunity to participate in work groups as they are established
  • Members of the FedPayments Improvement Community will also be notified of opportunities to provide feedback on work group and/or Fed-sponsored work efforts and be invited to attend our online and in-person events

New Members

Existing Members

The FedPayments Improvement Community will continue to be free and open to all interested stakeholders and represent a continuation of transparent, inclusive, and effective engagement. We look forward to engaging with you!

Secure Payments Task Force Publishes Payment Lifecycles and Security Profiles

As announced earlier today, the Secure Payments Task Force published the Payment Lifecycles and Security Profiles, educational materials outlining, the lifecycles, security characteristics and relevant laws and regulations for the most common payment types.

Developed through collaborative efforts of task force participants with diverse payments and security expertise and perspectives, the Payment Lifecycles and Security Profiles provide perspectives related to:

  • The lifecycles of the most common payment types, covering enrollment, transaction flow and reconciliation
  • Security methods, identity management controls and sensitive data occurring at each step in the payment lifecycles
  • Relevant laws and regulations, and other references, as well as challenges and improvement opportunities related to each payment type

“We believe the profiles are a valuable tool for all payments providers to assess where they can enhance their operations and improve overall payment security practices,” said Christopher Danvers, vice president of payments and digital services for American Airlines Federal Credit Union, who co-chaired the work group responsible for the profiles. “Our hope is that this information can raise awareness and understanding of payments security and risk issues across the many types of organizations that have a hand in the payments system,” Danvers remarked.

“The task force brought together a diverse group of organizations that have many different capabilities and experience, all of which were critical to studying the entire payments ecosystem,” said Reed Luhtanen, senior director of payments strategy at Walmart, who co-chaired the group with Danvers. “The resulting profiles will be an incredibly valuable resource for merchants, financial institutions and other businesses to use in educating anyone in their companies who has a role in payments, whether in customer support, information technology or product development.”

“The task force has been an important forum for bringing focus to our collective security dialogue, creating a foundation for ongoing collaboration on specific security topics,” said Ken Montgomery, the Federal Reserve’s payments security strategy leader and chief operating officer of the Federal Reserve Bank of Boston. “The security challenges facing the payments industry require broad cooperation and coordination across the payments ecosystem. Strong stakeholder collaboration is key to maintaining public confidence in the U.S. payment system and keeping pace with the rapidly evolving and expanding threat environment.

Read the full press release for more details.

Secure Payments Task Force to Conclude This Month

The Secure Payments Task Force will conclude its efforts in March with a final publication consisting of a collection of educational materials outlining the lifecycles and security profiles of today’s primary payment methods.

Task force participants will transition into the Federal Reserve’s FedPayments Improvement Community, established to provide stakeholders with opportunities to engage in the Federal Reserve’s ongoing payment improvement initiatives. As part of the community, task force participants will have opportunities to participate in work groups as they are established, to provide input into payments improvement efforts, and to attend online and in-person events.

“The Federal Reserve is grateful for the commitment demonstrated by these 200 industry leaders, and we are proud of the important work they’ve done to identify and establish payment security priorities,” said Esther George, president and chief executive officer of the Federal Reserve Bank of Kansas City, who is leading the Federal Reserve’s payments improvement initiatives. “There is more work ahead, and we are counting on the payments community to continue to bring dedication and expertise to the pursuit of a more secure payment system.”

Established in June 2015 in support of the Federal Reserve’s Strategies for Improving the U.S. Payment System, the task force has engaged more than 200 financial institutions, consumer groups, payment service providers, financial technology firms, merchants, government agencies, and others interested in payment security improvement efforts.

Take a look at some of the Secure Payments Task Force’s accomplishments:

  • Identified key security improvement priorities of payment identity management, data protection, and information sharing to help reduce risk and fraud;
  • Developed an online reference for payment fraud and risk information-sharing data sources, including intelligence reports, payments fraud trends, best practices and/or benchmarks;
  • Documented payment lifecycles and security profiles (to be published in mid-March on SecurePaymentsTaskForce.org) to educate stakeholders and provide perspectives on the lifecycles of the most common payment types, including security methods, identity management controls, sensitive data involved, and relevant laws and regulations, as well as challenges and improvement opportunities related to each payment type;
  • Contributed to the development of security-related faster payments effectiveness criteria and assessment of faster payments solution proposals for the Faster Payments Task Force;
  • Provided feedback to the Federal Reserve on expanding fraud data reporting, resulting in an enhancement of the Federal Reserve’s Payment Study.

Stay tuned! As later this year, the Federal Reserve expects to initiate new collaborative industry work groups to advance the work begun by the task force, informed by a planned study to analyze payment fraud and security vulnerabilities, assess potential approaches to mitigate them, and identify misalignment of incentives that may hinder progress.

For more information, read the press release in its entirety.

Examining Market Structure Implications in the Faster Payments Market

Make sure to check out Faster Payments: Market Structure and Policy Considerations (Off-site) – a new working paper by Federal Reserve research staff that explores potential market structures in the new world of faster retail payments. This research aligns with the desired outcome of faster payments outlined in the Strategies for Improving the U.S. Payment System paper, released by the Federal Reserve in 2015. In order to pursue safe, ubiquitous and faster payments, the Federal Reserve convened the Faster Payments Task Force, a diverse group of stakeholders who set forth a roadmap for the industry to achieve its vision for faster payments. The market structure paper explores what that faster payments market could look like and the potential implications of different market arrangements.

The paper discusses three hypothetical market structure scenarios – a dominant-operator environment, a multi-operator environment, and a decentralized environment – and considers how those scenarios may affect efficiency, safety and ubiquity of faster payments. Outcomes in these scenarios are driven by factors like coordination costs and the degree of market power among participants. Highlights include each scenario’s unique set of benefits and challenges and examines some of the tools available to overcome those challenges. For example, interoperability and cross-platform governance arrangements can help mitigate difficulties with market fragmentation in environments with multiple providers.

Learn more by reading the paper (Off-site) in its entirety.

The Next Steps Webinar Recording is now Available for On-demand Viewing

On September 6, 2017, the Federal Reserve issued Strategies for Improving the U.S. Payment System: Federal Reserve Next Steps in the Payments Improvement Journey (09/06/17, PDF). The paper reflects the Federal Reserve’s plans for near-term collaboration with the industry to move closer to achieving the desired outcomes articulated in the Strategies paper. Following the release of the paper, we hosted a number of educational events including a webinar series featuring Federal Reserve leaders expanding on the Next Steps paper.

Whether you missed the webinar and would like to view it for the first time or just want a refresher, you can now view the recording on demand. Join Dave Sapenaro, First Vice President and Chief Operating Officer of the St. Louis Federal Reserve and Federal Reserve System Payments Strategy Director, and Connie Theien, Senior Vice President and Director of the Federal Reserve System Payments Industry Relations Program, as they discuss the Next Steps paper and answer questions from attendees. As part of the discussion they outlined the Fed’s updated strategies to enhance the speed, safety and efficiency of the payment system from end to end through industry engagement and collaboration.

Looking for more educational payments content? Check out our YouTube channel (Off-site) now.

Fast Facts from the Latest Federal Reserve Payments Study Supplement

The Federal Reserve today released their latest payments study supplement which points to an increase in the use of credit cards in 2016 from 2015. Here are the fast facts:

  • The number of credit card payments grew 10.2 percent in 2016, a marked increase from the 8.1 percent growth experienced from 2012 to 2015
  • Remote general purpose credit card use increased 16.6 percent in 2016
  • Remote payments in 2016 represented 22.2 percent of all general-purpose credit and prepaid debit card payments, up 1.5 percentage points from an estimated 20.7 percent in 2015.

Other notable findings from the study include:

  • Total U.S. card payments reached 111.1 billion in 2016, reflecting 7.4 percent growth since 2015
  • From 2012 to 2015, ACH network transfers, representing payments over the ACH network, grew at annual rates of 4.9 percent by number and 4.1 percent by value
  • By 2016, 19.1 percent of all in-person general-purpose card payments were made by chip (26.9 percent by value), compared with only 2.0 percent (3.4 percent by value) in 2015

Learn more by reading the press release in its entirety or check out the full version of the report (Off-site).

Kenneth Montgomery Announced as Payments Security Strategy Leader

Last week, the Federal Reserve System announced that Kenneth Montgomery, Federal Reserve Bank of Boston’s first vice president and chief operating officer, will succeed Todd Aadland as the payments security strategy leader. In this role, Ken will lead the Federal Reserve’s effort to reduce fraud risk and advance the safety, security and resiliency of the U.S. payment system. His responsibilities will also include chairing the Secure Payments Task Force.

When asked about Montgomery, Federal Reserve Board Governor Jerome H. Powell, co-chair of the initiative’s oversight committee, noted that “Ken’s long and distinguished record of service to the Federal Reserve System, along with his business experience and technical expertise, are exactly what’s needed to help maintain a strong partnership with the industry on improved payments security.”

Aadland, who has held the position since September 2015, will be transitioning into a new role overseeing multiple Treasury Services programs as well as Wholesale Operations at the Federal Reserve Bank of Kansas City.

We are very excited to have Ken on board and wish Todd Aadland the best in his future endeavors. For more information, you can read the press release in its entirety.

Learn How You Can Improve the Security of the U.S. Payment System – Follow the Secure Payments Task Force Today

Protecting the security and integrity of the U.S. payments system is a top priority and the responsibility of all payments industry stakeholders. Through unpresecure payments task force banner artcedented industry collaboration, the Secure Payments Task Force has already started laying the foundation to address payments security challenges by identifying and promoting actions that can be taken by payment system participants.

In addition, the task force is developing valuable resources to improve the awareness and implementation of cybersecurity and fraud information sharing among U.S. payments industry participants. Keep reading to get highlights about the group’s first deliverable and learn how you can participate in this groundbreaking collaboration.

Expansive Set of Cybersecurity and Fraud Information

We are pleased to announce the launch of the SecurePaymentsTaskForce.org website where you can find this valuable resource to help you mitigate payments fraud.

The Information Sharing Data Sources were complied by the task force to highlight intelligence reports, payments fraud trends, best practices and benchmarks, and additional resources that can help organizations address payments fraud risk.

Share Feedback

Go to SecurePaymentsTaskForce.org to share your experiences and feedback, or to submit relevant data sources for addition to the list. Help motivate the payment industry to realize improvements and encourage advancements that work toward a better payments landscape for all.

Be a Part of the Change

Protecting the security and integrity of the U.S. payment system is a top priority and responsibility for all payments industry stakeholders. Through unprecedented industry collaboration, the Secure Payments Task Force provides a forum for stakeholders to advise the Federal Reserve in its leader/catalyst and operator roles on payment security matters, and helps identify and promote actions that can be taken by payment system participants collectively or by the Federal Reserve System.

Get involved today! Join the Community

The Secure Payments Task Force needs your support to help secure the U.S. payment system! Join the Community to provide advice on security matters and help determine areas of focus to advance payment system security.

Join the Secure Payments Task Force

Collaborate with your peers on the Secure Payments Task Force who share your passion for realizing material improvements on the security challenges of today’s payment systems:

  • Payment Identity Management
  • Data Protection
  • Information Sharing for the Mitigation of Payment Risk and Fraud

Visit SecurePaymentsTaskForce.org

Visit SecurePaymentsTaskForce.org for a deeper dive into the task force, the work they have completed and opportunities to get a seat at the table.

Federal Reserve Announces ISO 20022 Migration Timeline for the Fedwire Funds Service

The Federal Reserve Banks today announced plans to complete their migration to the ISO 20022 standard for their real-time gross settlement system, the Fedwire Funds Service, by the end of 2023. Adopting the ISO 20022 standard for payments clearing and settlement messages supports the Federal Reserve’s strategy to enhance the efficiency of both domestic and cross-border payments as described in Strategies for Improving the U.S. Payment System: Federal Reserve Next Steps in the Payments Improvement Journey.

Check out the press release for more information or visit the Federal Reserve Banks’ Resource Center for Adoption of ISO 20022 for Wire Transfers and ACH Payments page on our website.