The US real-time payments network currently reaches about 50% of the population, and was on track, via private sector channels, to provide complete coverage by the end of next year, as noted in an article at Forbes.com by Ike Brannon, a senior fellow at the Jack Kemp Foundation.
Mr. Bannon argues “now that someone has constructed a real time payment system to address this problem, we need the Fed and the rest of government to let the private sector complete the job.”
The biggest problem with the Fed’s entry into this market is that the two systems will not be interoperable, which means that a Fed-run system would beget a bifurcated payments system without any guarantee that any given individual or business could instantaneously send or receive a payment with any other entity. Because there are high fixed costs associated with either real-time system, most banks would invariably economize by picking one system or the other, and transactions between banks on different systems would remain slow.
Although lack of interoperability may be the case, at least the market can now make intelligent decisions for the short term and long term. Those banks, large corporates, small businesses, and credit unions that were on hold can now estimate the risk implications. One thing is for sure: the market is going to move forward either way in some regard.
At the AFP 2019 conference in Boston, there are plenty of sessions addressing the topic of real-time payments. One important topic: the implications of fraud. Strong prevention technologies and strategies must be put in place to address “deposit fraud” situations, especially when expedited funds availability is assigned to certain deposited checks.
What’s your feeling? Are you concerned about the risks of fraud in real-time payments?
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