Strategies for Improving the U.S. Payment System Feb 2016 ... · U.S. Payment System Feb 2016 Progress Report W3C – Web Payments Interest Group ... • Provide Web Payments Interest

Patrick Adler Federal Reserve Bank of Chicago

Strategies for Improving the U.S. Payment System

Feb 2016 Progress Report

W3C – Web Payments Interest Group Meeting February 22, 2016

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Session Goals •  Provide Web Payments Interest Group Members an update on

Federal Reserve Strategies for Improving the US Payment System

•  Discuss recently published Effectiveness Criteria and how they may relate to W3C standards work specific to payments and security standards on the web

•  Discuss other areas where W3C and Federal Reserve efforts may share common goals and identify opportunities to work together to improve the Payment System

©2016FederalReserveBanks.Materialsarenottobeusedwithoutconsent.

1. Actively engage with stakeholders on initiatives designed to improve the U.S. payment system. 2. Identify effective approach(es) for implementing safe, ubiquitous, faster payments. 3. Reduce fraud risk and advance the safety, security and resiliency of the payment system.

4. Achieve greater end-to-end efficiency for domestic and cross-border payments.

5. Enhance Federal Reserve Bank payment, settlement and risk management services to address identified gaps.

SPEED

SECURITY EFFICIENCY

INTERNATIONAL

COLLABORATION

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Five strategies in pursuit of five desired outcomes

Strategy 1: Stakeholder Engagement Actively engage with stakeholders on initiatives designed to

improve the U.S. payment system



Year One Accomplishments Collaboration as a Goal

Established the 320-member Faster Payments Task Force

Established the 180-member Secure Payments Task Force

Provided education and input opportunities in support of payments efficiency initiatives

Engaged stakeholders in payments improvement initiatives through industry events, communications and the FedPaymentsImprovement Community

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Strategy 2: Faster Payments Identify effective approaches for implementing safe, ubiquitous, faster payments



Mission and Objectives of the Faster Payments Task Force

Represent… views on future

needs for a safe, ubiquitous faster

payments solution

Assess… alternative

approach(es) for faster payment

capabilities

Address… other issues

deemed important to the successful development of

effective approaches

Identify and evaluate approach(es) for implementing a safe, ubiquitous, faster payments capability in the United States

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Technology Solutions Provider,

22%

Payments Network Operator, 4%

Large Financial Institutions, 7%

Medium Financial Institutions, 18% Small Financial

Institutions, 13%

Business End-User, 4%

Consumer Interest Organization, 3%

Government, 3%

Other, 16%

Industry Trade Organization, 10%

Faster Payments Task Force Composition

Total Registrants: 320+


Faster Payments Task Force Steering Committee Financial Institutions

Small •  Mark Keeling, The Bankers Bank •  Bob Steen, Bridge Community Bank Medium •  Wanda Chambers, Suncoast Credit

Union •  James Reuter, FirstBank Colorado Large •  Mitch Christensen, Wells Fargo & Co •  Thomas Rea, U.S. Bank

Non-Bank Providers •  Peter Gordon, FIS •  Jordan Lampe, Dwolla •  Steve Ledford, The Clearing House •  Bradley Wilkes, WingCash •  Ryan Zagone, Ripple Labs

End Users Government •  Gary Beets, U.S. Treasury Business •  John Drechny, Walmart •  Edward Mundt, Hard Rock International Consumer Interest •  Christina Tetreault, Consumers Union •  Susan Weinstock, Pew Charitable Trusts

Other Stakeholders •  Roy DeCicco, ASC X9 •  Janet Estep, NACHA •  Gary Stein, Consumer Financial Protection

Bureau



High-Level Work Plan and Timeline

PHASE 1 Development of process and criteria for identifying and assessing solutions

June 2015 - Jan 2016

PHASE 2 Development and

assessment of solution proposals

Feb - Nov 2016

PHASE 3 Review and publication of assessment results and

recommendations

Nov 2016 – Mar 2017

Plan the work… Do the work… Document the work…


Year One Accomplishments Faster Payments Effectiveness Criteria

•  Developed and adopted with broad stakeholder support, the criteria provide a description of stakeholder needs that can be used to assess faster payments solutions and as a guide for innovation in the industry

Decision-Making Framework •  Developed as a methodology for gaining task force approval of proposals and

deliverables

Glossary of Terms •  Developed in partnership with the Secure Payments Task Force, the Glossary

of Terms is a set of relevant definitions that establishes a common lexicon for task force work products

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Effectiveness Criteria Purpose

AdescripEonofstakeholderneedsthatcanbeusedbythemarkettoguidefasterpaymentsinnovaEon

AframeworktobeusedbytheFaster

PaymentsTaskForceforidenEfying

effecEveapproachestofasterpayments

Faster Payments

Effectiveness Criteria

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Developing the Effectiveness Criteria

Final Effectiveness Criteria

Subject Matter

Experts

Community Polls

Task Force Meetings

Task Force Vote to Approve

Industry Meetings

Webinars and

Speaking Sessions

Surveys

Social Media

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Faster Payments Effectiveness Criteria Ubiquity

U.1 Accessibility U.2 Usability U.3 Predictability U.4 Contextual Data Capability U.5 Cross-Border Functionality U.6 Multiple Use Cases

Speed (Fast) F.1 Fast Approval F.2 Fast Clearing F.3 Fast Availability of Good Funds to Payee F.4 Fast Settlement among Depository Institutions and Regulated Non-bank Account Providers F.5 Prompt visibility of payment

status

Efficiency E.1 Enables Competition E.2 Capability to enable value- added

services E.3 Implementation Timeline E.4 Payment Format Standards E.5 Comprehensiveness E.6 Scalability and Adaptability E.7 Exceptions and Investigations

Process

Safety and Security

S.1 Risk Management S.2 Payer Authorization S.3 Payment Finality S.4 Settlement Approach S.5 Handling Disputed Payments S.6 Fraud Information Sharing S.7 Security Controls S.8 Resiliency S.9 End-user Data Protection S.10 End-user/Provider

Authentication S.11 Participation Requirements

Governance G.1 Effective governance G.2 Inclusive governance

L.1 Legal Framework L.4 Data privacy L.2 Payment System Rules L.5 Intellectual property L.3 Consumer Protections

Legal

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Decision-Making Framework

Approved September 2015

Provides structure for gaining approval of Task Force work products Requires a supermajority consensus and support across stakeholder segments

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Available on FedPaymentsImprovement.org, the Glossary of Terms is a set of relevant definitions that establishes a common lexicon for task force work products

Terms

Steering Committee members

Task Force members

Industry Glossaries/ Publications

Key Project Deliverables

§ Payment industry glossaries/dictionaries

§ Payment stakeholder websites

§ Academic sources § Payment industry

publications § Task Force members § Authors of key project

deliverables § Stakeholder feedback

Input for Definitions Sources of Terms

Glossary of Terms

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What’s Next?

Capability Showcase • Creates awareness of marketplace

solutions that could support faster payments

• Helps prepare industry for proposal work, offering the opportunity for solution providers to collaborate

• Educates the task force

Solution Proposal and Assessment • Any Faster Payments Task Force member is

eligible to submit a solution proposal. • Each proposal will be assessed against the

faster payments effectiveness criteria. • A proposal template, developed by the Faster

Payments Task Force, will be provided.

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Strategy 3: Payment Security Reduce fraud risk and advance the safety, security and resiliency of the payment

system



Mission and Objectives of the Secure Payment Task Force

Provide a forum for stakeholders to advise the Fed in its leader/catalyst and operator roles on payment security matters, and identify and promote actions that can be taken

by payment system participants collectively and/or by the Federal Reserve System.

Determine areas of focus for payment security and priorities for

future action

Advise the Fed on

payment security matters

Coordinate with the Faster Payments Task

Force

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Secure Payments Task Force Composition

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Financial Institutions Small •  Chris Gilbert, Bankers’ Bank of Kansas •  Stephen Ranzini, University Bank Medium •  Anthony Meholic, The Bancorp Large •  Frank Perrelli, BNY Mellon •  Glen Ulrich, U.S. Bank

Non-Bank Providers •  Terrence Griffin, CO-OP Financial

Services •  Nancy O’Malley, MasterCard •  Terry Dooley, Shazam •  Victoria Strayer, TSYS •  Dave Faoro, Verifone, Inc.

End Users Government •  Cedric Menchion, Killeen Independent School

District Consumer •  Suzanne Martindale, Consumers Union Business •  Trent Addington, Best Buy •  Reed Luhtanen Wal-Mart, Inc.

Other Stakeholders •  Stephen Mott, BetterBuyDesign •  Brian Peretti, Department of the Treasury -

OCIP

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Year One Accomplishments

Identification of Areas of Focus for Future Action

Collaboration on the Effectiveness Criteria

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Payments Security Landscape Study

Improvement Opportunities

Study’s focus on improving Standards, Data Protection and Identity Management informed the task force objectives and work plan

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Areas of Focus for Future Action Payment Identity Management

Law and Regulation Coordination

Information Sharing for Mitigation of Payment Risk and Fraud

Data Protection

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Timeline for Task Force Areas of Focus and Priorities for Action

Identified 12 payment security problem

statements and potential work efforts

Reviewed, and refined

problem statements Hosted task

force segment calls

Refined potential work

efforts Prioritized top

four most valuable work

efforts

Task force launches 1-2 high priority work efforts

August Task Force

Meeting

October Steering

Committee

November Task Force

Meeting December –

1Q2016

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Collaboration on the Effectiveness Criteria The Secure Payments Task Force helped develop the

security-related Faster Payments Effectiveness Criteria

S.1 Risk Management S.2 Payer Authorization S.3 Payment Finality S.4 Settlement Approach S.5 Handling Disputed Payments

S.6 Fraud Information Sharing S.7 Security Controls S.8 Resiliency S.9 End-user Data Protection S.10 End-user/Provider Authentication S.11 Participation Requirements

Safety and Security

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Security Criteria Work Group Participants ErikAnderson–BloombergLP

PaulDoyle–IndividualPar:cipant

KristopherKnight–StateofDelaware

BillO’Donnell–IBM

MaFhewSpeare–RegionsFinancial

AdamAnderson–BankofCommerce

JasonDrohman–TheWesternStateBank

Chris:neKoncal–IndividualPar:cipant

StaciPayant–BBVACompass

PeterTapling–Authen:fy,Inc.

MariaArminio–AvenueBConsul:ng

CatherineEnnis–StanleyBlack&Decker,Inc.

SharonLees–Macon-AtlantaStateBank

BrianPereR–DepartmentoftheTreasury

–OCIP

RickVanLuvender–FirstData

LarryAubol–TASCET

EvansFrazier–BoozAllenHamilton

ReedLuhtanen–Wal-MartStores,Inc.

RandiPoFer–BuseyBank

ChrisVavricka–PaymentAssociates

SherryAvena–Interac:veFinancialServicesGroupInc.

DaveFaoro–Verifone,Inc.

StephenLindgren–CornhuskerBank

JoseMichaelRael–IndividualPar:cipant

JayWack–ANSIX9Accredited

StandardsCommiFee

JamesBaird–Transcentra

LewisGoodwin–GreenDotBank

GregMacMillin–SecurityServiceFederal

CreditUnion

StephenRanzini–UniversityBank

CharlesWallen–Spectrum

JillBrungardt–CommerceBank

AnnMarieHart–MagTek,Inc.

AnthonyMeholic–TheBancorp

BrianRussell–Giesecke&Devrient

BradleyWilkes–WingCash,LLC

DannaBurchess–FivePointsBank

DavidJackson–Oracle

CedricMenchion–KilleenIndependentSchool

District

EdScheidt–ANSIX9Accredited

StandardsCommiFee

HeatherWyson-Constan:neAmericanBankers

Associa:on

JohnCarlson–FSISAC

ArunJayaram–DwollaInc.

RobertMoore–AstoriaBank

EricSchurr–TMGFinancialServices

MarkDangelo–IndividualPar:cipant

JerryKickenson–SWIFT

StephenMoF–BeFerBuyDesign

DonaldSeeterlin–ChesapeakeBank

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What’s Next?

Payment Identity

Management Work Group

Work Groups for

Remaining Focus Areas

Guidance on Fed

Research, Education

and Standards

Efforts

Consult on Faster

Payments Solution Proposal

Assessment

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Strategy 4: Payments Efficiency Achieve greater end-to-end efficiency for domestic and cross-border payments



Year One Accomplishments B2B Payments Electronification

Promoted the Small Business Payments Toolkit, a set of free resources intended for small businesses and banks that serve them

Tested the proof of concept for a B2B Directory, a tool that seeks to enable businesses to make more electronic payments to vendors and other payees

Explored business model and governance issues related to the future Business Payments Directory Association, which would bring the B2B Directory to production

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What’s Next for B2B Electronification?

B2B Directory Proof of Concept and Directory Association •  Address issues concerning trust, governance,

security, business model, roll-out and adoption •  Test electronic payment identity examples, use

cases and information flows •  Establish a Directory Association to bring directory

to production

ISO 20022 Remittance Standards Education Work Group •  Education and promotion of remittance standards •  Tools to support moving from legacy to ISO 20022

standards.

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Year One Accomplishments ISO 20022 Standard

Continued to educate stakeholders on key benefits of ISO 20022 as a global messaging standard for financial services

Created the Federal Reserve’s ISO 20022 Resource Center, a centralized repository for research and education

Announced a high-level plan to implement ISO 20022 for U.S. wire transfer systems

Began work to explore use cases for application of the ISO 20022 standard for ACH payments

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What’s Next for ISO 20022 implementation?

ISO 20022 for Wire Transfer •  Develop a detailed plan and

timeline for implementation of the ISO 20022 format for wire transfers

ISO 20022 for ACH •  Continue industry education and

collaboration on the rationale and benefits of the potential conversion of the ACH network to ISO 20022

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Strategy 5: Enhanced Federal Reserve Services

Enhance Federal Reserve Bank payment, settlement and risk management services to address identified gaps



Year One Accomplishments

Expanded hours of the National Settlement Service

Announced support and began planning for the NACHA Same-Day ACH initiative

Collaborated with FS-ISAC to distribute their community bank threat report to financial institutions via FedLine®

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What’s Next?

Implement enhancements to FedACH® SameDay Service

Explore enhancements to the FedGlobal ACH Service

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DISCUSSION TOPICS / ADDITIONAL INFORMATION

EffecEvenessCriteria–Overview:hPps://fedpaymentsimprovement.org/wp-content/uploads/faster-payments-effecEveness-criteria-overview.pdfDetailed:hPps://fedpaymentsimprovement.org/wp-content/uploads/fpT-payment-criteria.pdf

ProgressReport–hPps://fedpaymentsimprovement.org/wp-content/uploads/0216-progress-report.pdf


Join the Community at FedPaymentsImprovement.org!

Receive information on task forces and work groups, invitations to live/virtual events, surveys and other online feedback

opportunities.

@FedPayImprove FedPayments Improvement

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Questions?

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Documents

Strategies for Improving the U.S. Payment System Feb 2016 ... · U.S. Payment System Feb 2016 Progress Report W3C – Web Payments Interest Group ... • Provide Web Payments Interest