FEATURE Faster Payments: Not Fast Enough Bob Steen, Chairman/CEO, Bridge Community Bank


The clock is ticking on the deadline to develop faster payments in the United States. It’s been nearly six years since the initial 10-year call to action. We’re over half way there on the clock, and despite progress, we are far short of the objective. We now live in a world where consumer expectations for


technology are immediate. Tolerance is close to zero. I heard Sandra Pianalto, then president and CEO of the


Federal Reserve Bank of Cleveland, in 2012 paint a vision of the payments system in the United States.1


industry would move transactions faster from origination to settlement, the industry would function more efficiently, and it would develop an “array of payment instruments that satisfy consumer preferences.” I took that as a promise. The Federal Reserve and the Faster Payments task force it


fostered followed that vision. Over its two years, the task force achieved an unprecedented collaboration throughout the industry, agreed on and published criteria for payments effectiveness, and solicited and reviewed proposals for faster payments. It published a final report and a subsequent report on future direction. The task force and its consultant reviewed and assessed 19 faster-payments proposals against the effectiveness criteria. The Federal Reserve states in its “Next Steps” reported


“much work remains to implement ubiquitous real-time retail payments and enhance the safety, efficiency, and resilience of the U.S. payment system.” To that end, a Governance Foundation Framework Team has been working hard and just issued a paper for the Operating Vision for the US Faster Payments Council. We all have an opportunity and a duty to respond to their request for industry feedback. In addition, a Faster Payment Directory Work Group has been established. This is hard stuff but critical to community bank relevance in payments. Our plan is to help fill the gap in the current state of faster-payments, especially for community institutions.


1 www.clevelandfed.org/en/newsroom-and-events/speeches/ sp-20121022-collaborating-to-improve-the-us-payments-system.aspx


In a decade, the payment To remain competitive in payments and to retain and gain


customers, community financial institutions need direct access to a faster-payments system. The transaction should look and feel as though the sender and receiver are at the same bank. I believe it will ultimately be up to the Federal Reserve to fill


that gap and provide community financial institutions with access at a fair cost, just as they have with ACH and checks. Otherwise, our customers will turn to the larger financial institutions or non-banks that can build their own proprietary payment system. Exactly the wrong result for those of us looking for interoperability and choice. The Federal Reserve is exploring the need to be a service


provider, as stated in its “Next Steps in the Payments Improvement Journey” paper.2


The Federal Reserve board has identified policies


as a condition of providing financial services, and I urge them to review those provisions carefully—and soon. As I understood the effectiveness criteria, I see a clear and


obvious duty for the Fed to provide faster-payment processing services based on an “overriding public interest considerations for maintenance of an operational presence by the System.” There will be countless reasons it’s said to be difficult. A few


reasons will be valid but certainly manageable. I offer these three questions as the most urgent:


1. Will the Fed do what a central bank should do? 2. Will the Fed serve the key operating and leadership role that they have historically understood as essential?


3. Will the Fed deliver what it said it would do in the 2015 strategy paper?


The industry simply must provide advanced payments capabilities. It’s important to remember at this critical and urgent juncture that our customers value choice, certainty, security, and speed. They will very soon accept nothing less.


2 https://fedpaymentsimprovement.org/wp-content/uploads/ next-step-payments-journey.pdf


We now live in a world where consumer expectations for technology are immediate. Tolerance is close to zero.


Bob Steen is Chairman and CEO of Bridge Community Bank, an employee-owned community bank. He currently serves on the ICBA Operations and Payments Committee, and a related Fed work group. Bob served a 3 year term on the NACHA Board of Directors and is currently a board member of Shazam. He was a member of the Fed’s Faster Payment Task Force and a representative for the small financial institution segment on the Faster Payment Steering Committee. He currently serves on the Faster Payment Directories Work Group.


6 MIDWEST INDEPENDENT BANK MIBANC.com


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