The US Federal Reserve’s recent white paper on the development of a Faster Payments system was a disappointment to many, as it essentially called for more research and industry discussion rather than any concrete development plans. This is unsurprising, given the US market’s reluctance to have any form of regulatory mandates when it comes to payments innovation and development. While the US market is likely to develop slowly, the rest of the world will continue to develop Faster Payments infrastructure and related services, and it will increasingly leave the US behind.
Faster Payments will eventually make it to the US, but at what cost?
With the Federal Reserve taking a long-term view of Faster Payments development, it is likely that the US will face a situation similar to that experienced with the Europay, Mastercard and Visa standard (EMV): a drawn-out deployment process that is overtaken by the rest of the world. However, unlike with EMV, the Federal Reserve appears to be taking a stronger approach than it has in the past, with an explicit aim to get the buy-in of a wide range of stakeholders in the US’s increasingly sclerotic payments system. This is a positive step, as it suggests that a more structured approach may be taken to help the US move forward in developing its payments infrastructure and that it will, eventually, deploy Faster Payments.
The rest of the world, however, is already making rapid progress with Faster Payments, leaving the US behind in terms of the speed and functionality of its payment system. This may pose challenges over time as growing numbers of innovative payment services are launched on the back of Faster Payments – innovations with which the US will not be able to compete. In an increasingly fast-paced digital-led commercial environment, the imposition of slow-moving batch payments on international transactions, in particular, will be perceived more and more as an anachronistic throwback, which will hinder broader US global business capabilities.
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Assessing theLong-Term impact of mPOS on the Payments Market, IT003-000604 (February 2014)
Ovum Decision Matrix: Selecting an Electronic Retail Payment Switch Platform, IT003-000602 (January 2014)
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On the Radar: VocaLink, IT003-000606 (February 2014)
Gilles Ubaghs, Senior Analyst, Financial Services Technology