Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
United States: The Fed’s Jump Into Real Time Payments Appears To Be Good News For Community Banks and FinTechs
Pryor Cashman | Jeffrey Alberts and Dustin N. Nofziger | Aug 13, 2019
The Federal Reserve Board has announced plans to develop a real-time payment service that should appeal to FinTech companies and community banks. The Board announced last Monday that it will develop a new round-the-clock real time payment and settlement service to support faster payments in the United States. This new real-time gross settlement (RTGS) service, which will be known as the "FedNow Service," is anticipated to be available in 2023 or 2024. The Board is currently soliciting comments on all aspects of the proposed service in order to finalize its design and features. The Board's intention to operate a RTGS service is a win for community banks and FinTech companies, although it may threaten those FinTechs with business models centered around providing real time payments.
The Board's plans were not developed in a vacuum. The Clearing House (TCH), which is owned by 30 of the world's largest commercial banks, previously rolled out a RTGS system known as the "RTP network" in November 2017 – some six years before the Board anticipates that its FedNow Service may first become available. The RTP network reportedly cost over $1 billion to develop and already reaches over 50 percent of U.S. demand deposit accounts. TCH's Business Principles for the RTP Network provide that TCH runs the RTP network "as a utility for the benefit of the industry" and that it charges flat fees to all participants regardless of size or volume.
See: New Regulatory Framework for Canadian Retail Payments Coming in 2019
It is fair to say that community banks have been skeptical of the intentions of the large commercial banks behind TCH and the RTP network. The Independent Community Bankers' Association of America (ICBA), for example, strongly advocated for the Board to operate a competing RTGS service. The ICBA argued that there was a need for competition in real-time payments and expressed concern about "the risk of having only one, for-profit, private sector settlement service run by the nation's largest and riskiest financial institutions." Due in part to these concerns, the Board's previously announced consideration of whether it should create a competing system reportedly slowed adoption of the RTP network by community banks.
FinTech companies may also benefit from the availability of a real time payments networks. Consumers increasingly expect real time payments, and FinTech companies have expressed frustration about the difficulty of providing payments services in the United States that can meet this expectation. Of course, those FinTech companies whose primary service is the provision of faster payments may face a future threat from the FedNow Service.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
Support NCFA by Following us on Twitter!Follow @NCFACanada  |
Related Posts
What to expect from social fundraising world in 2020- Final Form of Crowdfunding Regime in Ontario and Other Participating Jurisdictions
- ClearScore and Zopa ink deal to bring open banking to the credit industry
- Powering local regeneration through crowdfunded investment
- Team NCFA Canada Wrap-up: North of 41 hosted Amazing TO Tech Race
- Equity Crowdfunding at Year One, What’s The Impact?
Leave a Reply