navigatingtheshiftingpaymentsnavigating the shifting … · 2018-04-19 · the national check...

Navigating the Shifting PaymentsNavigating the Shifting Payments Landscape

Brian Stearns, AAP, NCP, VP & Supervisor, Risk Management Services

Brian Stearns, AAP, NCPI help members identify and quantify risks.

VP & Supervisor, Risk Management Services Spent almost ten years managing the operational, compliance, and

f C frisk of payment systems including ACH, checks, and wire transfers for Credit Unions, including six years at Farmers Insurance Group FCUS d Vi Ch i f W P ’ R l Ad i C il Served as Vice-Chair of WesPay’s Rules Advisory Council

Holds both the AAP and NCP accreditations and is a Certified Internal Auditor

Brian enjoys hockey and playing the guitar

© 2018 Western Payments Alliance. All rights reserved. No reproduction/distribution without prior written consent. 2

WesPay, as a Direct Member of NACHA – The Electronic Payments Association and through its affiliation with the Electronic Check Clearing House Organization (ECCHO) as an NCP g g ( )Trusted Partner, is a specially recognized and licensed provider of ACH and Check education, publications and support. Regional Payments Associations are directly engaged in the ACH rulemaking process and support of the Accredited ACH Professional (AAP), Accredited Payments Risk Professional (APRP) and National Check Professional (NCP) programs.

This material may be derived from collaborative work product developed by NACHA, ECCHO and other member Regional Payments Associations. This material is not intended to provide any warranties or legal advice and is intended for educational purposes onlywarranties or legal advice and is intended for educational purposes only.

© 2018 Western Payments Alliance (WesPay). All rights reserved.NACHA owns the copyright for the NACHA Operating Rules & Guidelines. The Accredited ACH Professional (AAP) and Accredited Payments Risk Professional (APRP) are registered service marks of NACHA.The National Check Professional (NCP) is a registered service marks of ECCHO

© 2018 Western Payments Alliance. All rights reserved. No reproduction/distribution without prior written consent.

The National Check Professional (NCP) is a registered service marks of ECCHO.

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Agenda

» Fed’s Faster Payments Task Force» Same Day ACH» New Payment Solutions» Blockchain and Bitcoin


FASTER PAYMENTS TASK FORCE


Faster Payments Task Force

» Established in 2015» Made up of Fed and industry leaders» Objectives

• Represent views on future needs for a safe ubiquitous• Represent views on future needs for a safe, ubiquitous faster payments solution

• Address other issues deemed important to the successful d l f ff i hdevelopment of effective approaches

• Assess alternative approach(es) for faster payment capabilitiesp

» Determined key factors critical to Faster Payments» 36 criteria defined

I d t i it d t b it l l ti


» Industry invited to submit proposals on solutions

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Faster Payments Effectiveness CriteriaUbiquityUbiquity

U.1 AccessibilityU.2 UsabilityU.3 Predictability

EfficiencyE.1 Enables CompetitionE.2 Capability to enable value-

dd d i

Safety and Security

U.4 Contextual Data CapabilityU.5 Cross-Border FunctionalityU.6 Multiple Use Cases

Speed (Fast)

added servicesE.3 Implementation TimelineE.4 Payment Format StandardsE.5 ComprehensivenessE 6 Scalability and Adaptability

S.1 Risk ManagementS.2 Payer AuthorizationS.3 Payment FinalityS.4 Settlement ApproachSpeed (Fast)

F.1 Fast ApprovalF.2 Fast ClearingF.3 Fast Availability of Good Funds to Payee

E.6 Scalability and AdaptabilityE.7 Exceptions and Investigations

Process

S.5 Handling Disputed PaymentsS.6 Fraud Information Sharing S.7 Security ControlsS.8 ResiliencyS 9 E d D t P t tito Payee

F.4 Fast Settlement among Depository Institutions and Regulated Non-bank Account ProvidersF.5 Prompt visibility of payment

S.9 End-user Data ProtectionS.10 End-user/Provider

AuthenticationS.11 Participation Requirements

GovernanceG.1 Effective governanceG.2 Inclusive governance

status

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

Legal


L.3 Consumer Protections

SAME DAY ACH


Same Day ACH Phase 3

F ti litF ti lit Phase 1Phase 1 Phase 2Phase 2 Phase 3Phase 3FunctionalityFunctionality

Transaction

Phase 1 September 23, 2016


C dit



Credits &

Phase 3 March 16, 2018

Phase 3 March 16, 2018

Credits &Transaction Eligibility

Processing Deadlines

Credits

10:30 am ET & 2:45 pm ET

Credits & Debits

10:30 am ET & 2:45 pm ET

Credits & Debits

10:30 am ET & 2:45 pm ET

New Settlement Times

ACH C dit

p

1:00 pm ET & 5:00 pm ET

p

1:00 pm ET & 5:00 pm ET

p

1:00 pm ET & 5:00 pm ET

ACH Credit Funds

AvailabilityEnd of RDFI's processing day

End of RDFI's processing day

5:00 PM RDFI local time


Funds Availability Same-Day CreditsEff ti M h 16 2018Effective: March 16, 2018

» Subsection 3.3.1.1 – General Rule for the Availability of Credits: • For a Credit Same Day Entry, and RDFI must make the

amount of the Credit Entry available to the Receiver foramount of the Credit Entry available to the Receiver for withdrawal no later than 5:00PM in the RDFI’s local time on the Settlement Date of the Entry…

» RDFI local time guidance» RDFI local time guidance• RDFIs can determine “local time” base on:

o Geographic footprintg p po Branch locationso Receivers address


Funds Availability Same-Day CreditsEff ti M h 16 2018Effective: March 16, 2018

» Atlantic Time Zone• Required to make funds available to Receiver for

withdrawal no later than 5:00 p.m. Eastern Time (6:00p.m. Atlantic/local time)Atlantic/local time)

» Chamorro Time Zone• Required to make funds available to Receivers for

withdrawal no later than opening of business on the Banking Day following the Settlement Date of the EntryBanking Day following the Settlement Date of the Entry


Applying the Fed Strategy to Same Day ACH

Properties

Ubiquity √ Yes!

Speed X No- can take hours or days to post

Efficiency √ Yes

Safety & Security √ AbsolutelySafety & Security √ Absolutely

Governance √ ACH Rules, Federal Regulations

Legal √ Existing Agreements


Zelle

» Primarily P2P• We will see expanded use

» Shared directoryM bil h #• Mobile phone #

• Email» Debits sent and credits posted within minutes» Debits sent and credits posted within minutes» Settles via ACH

• Gross settlement» RTP settlement possible


Benefits of Zelle

» Integration with bank branded mobile apps• In conjunction with Zelle brand• No “New APP required”• Near real time funds availability to your “real DDA”• Near real time funds availability to your real DDA• Trusted parties• No requirement to provide banking info to third partyq p g p y

» Out of network consumers can use Zelle app• Payments supported using card networks• Provides ubiquity


Zelle

» Utilizes multiple fraud analytics in risk mitigation

» Risk tools through Early Warning• Geolocation• Value / Velocity• Phone registryPhone registry

» Participants also add their own fraud analytics


Zelle Partners


The Zelle User Experience


Who can use Zelle?


Applying the Fed Strategy to Zelle

Properties

Ubiquity √ Absolutely

Speed √ Freaky Fast!

Efficiency √ Very

Safety & Security √ FI SecuredSafety & Security √ FI Secured

Governance √ Reg. E, ACH Rules, Reg. CC = Yup!

Legal √ FI and Zelle Agreements


Applying the Fed Strategy to Zelle

Properties

Ubiquity √ Absolutely

Speed √ Freaky Fast!

Efficiency √ Very

Safety & Security √ FI SecuredSafety & Security √ FI Secured

Governance √ Reg. E, ACH Rules, Reg. CC = Yup!

Legal √ FI and Zelle Agreements

AAAYYYYYY!!!!!!!!© 2018 Western Payments Alliance. All rights reserved. No reproduction/distribution without prior written consent.

AAAYYYYYY!!!!!!!!22

REAL-TIME PAYMENTSREAL-TIME PAYMENTS


Real Time Payments

» A new payment channel created by the Clearing House» Facilitates payments 24 x 7» Supports messaging

• Will be ISO 20022 compliant» Credit push system

• Supports requests for paymentSupports requests for payment» “The Clearing House is working… to ensure that every

financial institution in the U.S. has an easy way to access the RTP network by 2020.” (theclearinghouse.com)


Defining the RTP ecosystem


Sample RTP Scenario

Note: Funds are accessible within seconds


RTP Participation Level


24/7/365 Customer Service & Ops SSupport» FIs introducing RTP must be prepared to deliver these

capabilities 24 hours per day, 7 days per week, 365 days per year with high availability regardless of their level of participation.level of participation.

» This means they must be able to: • Receive and respond to payments and non-payment

messages 24/7/365 • Provide necessary back-office operations and customer• Provide necessary back-office operations and customer

service support 24/7/365 • Perform applicable real-time fraud and AML screening

24/7/365


24/7/365

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RTP Settlement


Applying the Fed Strategy to RTP

Properties

Ubiquity √ Yes, it’s available to everyone

Speed √ 24/7/365

Efficiency √ Of course

Safety & Security √ FI backed payment channelSafety & Security √ FI backed payment channel

Governance √ All the good ones!!

Legal √ Absolutely


Applying the Fed Strategy to RTP

Properties

Ubiquity √ Yes, it’s available to everyone

Speed √ 24/7/365

Efficiency √ Of course

Safety & Security √ FI backedSafety & Security √ FI backed

Governance √ All the good ones!!

Legal √ Absolutely


A “Bit” about Blockchain


Blockchain

» What is a blockchain?• Underlying technology• Many use cases; Bitcoin is one example• Secure documents

» Why it’s getting so much attention• Uses a distributed ledger

R d i t i d i lo Records maintained in many places• Kept secure with sophisticated cryptography

» Simple way to rememberp y• Blockchain is the rail• Bitcoin is the train riding the rails


Digital Currencies

» Digital Currency (Wikipedia)» Digital Currency (Wikipedia)

• A medium of exchange, electronically created / stored

U d t b d d i• Used to buy goods and services

• The preferred term of cryptocurrencies


Virtual Currency

» A type of digital currency• Owned and operated by a counterparty (e g FB)• Owned and operated by a counterparty (e.g. FB)• Used to buy goods within a closed environment• Typically used in virtual environments (e.g.

games)games) » Regulators are attempting to define it

• “A type of unregulated, digital money, which is issued and usually controlled by its developers,

d d d t d th b fand used and accepted among the members of a specific virtual community” – European Central Bank

• “A medium of exchange that operates like a g pcurrency in some environments, but does not have all the attributes of real currency” – U.S. Department of Treasury FinCEN


Bitcoin – Launched in 2009

» Peer–to-peer technology; no central authorityp gy; y

» Managing transactions and issuing of bitcoins is carried t ll ti l b th t kout collectively by the network

• Open-source design is public

• Nobody owns or controls Bitcoin

» 21 million Bitcoins capped» 21 million Bitcoins - capped

» Currently the dominant cryptocurrency


Applying the Fed Strategy to Bitcoin

Properties

Ubiquity X Not yet

Speed √ Absolutely

Efficiency √ Very

Safety & Security X No way!Safety & Security X No way!

Governance X What governance?

Legal X Non-existent


What’s ahead for Blockchain?

» More activity by regulators

» Clarity regarding the role of regulated FIs• Who is the funding agent?g g• Acceptance services• Multicurrency accounts

» Document sharing and security• Value in document security• Healthcare records• Supply chain management


Developing Payments Strategy

» Determine customer needs and potential use cases» Review capabilities of partners

• Financial InstitutionsT di t• Trading partners

» Review current system capabilities» Evaluate potential for new or current solutions and» Evaluate potential for new or current solutions and

partners to meet needs


Resources to Assist

(415) [email protected]

» Consulting: » Risk Management» Consulting:

• Payments Strategy

T M t

» Risk Management Services:

• ACH • Treasury Management

• Regulatory Compliance • RDC

• Wire Transfers• Process Improvement • Wire Transfers

• E-Banking


Questions?


Please contact us at:

300 Montgomery St, Suite 450San Francisco, CA 94104

Phone: 415-433-1230Fax: 415-433-1370www.wespay.org

[email protected]

Payments Hotline - 415-373-1200 or [email protected]


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navigatingtheshiftingpaymentsnavigating the shifting … · 2018-04-19 · the national check...

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