On January 30, 2017, a report created by the Federal Reserve titled, “The U.S. Path to Faster Payments,” was released. Serving as part-one of a two-part report (the second installment will be released later this year), the publication was created by a group of payment industry stakeholders called the Faster Payments Task Force. The report details the processes involved with researching the current payments landscape and the experimentation of innovative tools to create newer and faster payment solutions.
According to the report, the steady decline of consumers using checks coupled with the growth of digital payments has resulted in a shift to implementing faster and more user-friendly payment systems. Piggybacking off The Fed’s “Strategies for Improving the U.S. Payment System” in 2015, this new report seeks to integrate emerging technologies, such as mobile applications, Application Program Interfaces, Internet of Things, and smart devices, into big banks’ faster payments solutions. Among several charts and graphs, the authors also touched upon the influence that blockchain technology and cryptocurrencies have on the current payment ecosystem:
“Digital currencies have the potential to change the payments landscape, particularly if adopted by one or more major central banks.”
Because blockchains can allow for faster transactions through peer-to-peer solutions, automated processes, and other improved benefits, the ways that central banks and other financial institutions administer settlements will need to improve if they are to remain competitive.
“To take advantage of these trends, the payment industry needs to work together to identify effective approaches and opportunities for implementing safe, ubiquitous, and faster payment capabilities in the United States.”
Furthermore, the report states:
“Distributed ledger technology (e.g. blockchain) can potentially allow transactions to be verified and recorded across a distributed network of computers. This might change the role of traditional players in payment clearing and settlement processes – for example, by eliminating the need for some types of centralized transaction bookkeeping.”
With the blockchain’s ability to tear down financial barriers, or at least redefine them, cross-border payments and other services that require more processing time than domestic transactions could be sped up to match real-time speed. The report extrapolates the potential consumer benefits of such an adoption:
“If the United States follows a similar trajectory, faster payments could facilitate cost savings to society in the long run.”
The report breaks down the components of this topic along with various other subtopics in detail, providing readers a comprehensive assessment of The Faster Payments Task Force agenda and strategy.
Part Two of the final report will provide more details of faster payment solutions that will meet specific criteria laid out by a “Qualified Independent Assessment Team.” Based on the results of this analysis, the task force will provide its recommendations for the industry to test and develop safer, faster, and more convenient payment systems.