Take On Payments


Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

November 2, 2015

Will NACHA's Same-Day ACH Rules Change Be an Exception-Only Service, At Least in the Short Term?

In May 2015, the 40-plus voting members of NACHA contingently approved mandating the acceptance of domestic same-day ACH payments by receiving banks. The voting members approved a three-phase development lasting 18 months. The first phase, starting in September 2016, is limited to credit pushes, followed one year later by debit pulls in the second phase. All payments are subject to a $25,000 maximum. By the final phase in March 2018, receiving banks will be required to make credit payments available to the receiving account holder by 5 p.m. local time to the receiving bank. Funds availability in the earlier phases is by the receiving bank's end-of-processing day. The service offers both a morning and afternoon processing window. A same-day return-only service is offered at the end of the business day. Lastly, originating banks are obligated to pay a 5.2 cent fee for every payment to recover costs to receiving banks.

Last month, the Federal Reserve Board of Governors removed the contingent part of the above approval by allowing the participation of FedACH, which serves as an ACH operator on behalf of the Reserve Banks. Approval followed a review of comments submitted by the public, of which a preponderance of the responses was favorable to FedACH participating in the service.

This was not the first time NACHA tried to mandate same-day ACH. Back in August 2012, a ballot initiative to mandate acceptance failed to receive a supermajority required for passage. Failure was due to a variety of reasons, and it was difficult to discern one overriding reason.

I think that most observers would agree that the earlier rollout of the Fed's proprietary opt-in, same-day service in August 2010 and April 2013 set the groundwork for mandating same-day.

As with any collaborative organization like NACHA, compromises were needed to garner sufficient votes for passage. The compromises included:

  • Same-day payment eligibility rules change due to a multi-phase development cycle requiring one-and-half years to complete from start to finish.
  • Providing certainty to the receiver that funds availability will be expedited on the day of settlement as part of the final phase, rather than earlier, which only requires posting by the receiving bank's end-of-processing day. The bank's end-of-processing day can be as late as the morning of the following business day.
  • Delaying a debit service by one year after the rollout of the phase one credit service will, to the potential surprise of the payment originator, delay settlement of debits one business day later than would occur for credits.
  • Any payment amount over $25,000 will settle one business day later than the payment originator may have expected if the payment originator is not aware of the payment cap.

Given these compromises, what do you think financial institutions can do to accelerate broader adoption of same-day?

By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

November 2, 2015 in ACH, regulations, regulators | Permalink | Comments (0)

October 19, 2015

Got Cash?

The governments in countries such as Sweden and Nigeria may have taken initial steps to move to a "cashless" nation, but here in the United States, there is no question that cash is still king. It remains the most-used retail payment instrument, especially for low-value payments. This finding from the Fed's Cash Product Office (CPO) was welcome news to a group of independent (nonfinancial institution) ATM operators that I had the pleasure of addressing last month at their annual conference. The primary business of these entrepreneurs is getting cash into the hands of consumers through their terminals located in a variety of malls and merchandise, food, and beverage stores. Of the estimated 400,000–425, 000 ATMs and cash dispensers operating in the United States, approximately 60 percent are owned by these nonfinancial institutions.

One of the CPO's main missions is maintaining a supply of currency and coin to meet demand in both normal times and special situations such as natural disasters, when other forms of payment might be unavailable. As a critical part of accomplishing that mission, the CPO constantly evaluates research to determine how cash use is changing in this country. One of the main sources of research is the Fed's Diary of Consumer Payment Choice (DCPC). Data collection was last fielded in 2012, but is being conducted again now. To collect the data, the DCPC asks a representative national sample of about 2,500 individuals to record all their financial transactions over a rolling three-day period. In addition to recording the transaction and demographic information, respondents were also asked to indicate their top preferred payment method and their second preferred method of payment in instances when their top choice is not available.

Some of the major findings of that study include:

  • Debit and credit cards represent the stated primary payment choice, at 64 percent, but 30 percent of the consumers stated their primary payment preference was cash.
  • Cash serves as the backup payment method for all segments, reflecting its importance in our overall payment infrastructure.
  • Interestingly, although 3 percent of the consumers said their preferred payment method was checks, they actually used cash twice as often as writing checks.
  • Reflecting the tendency for people to use cash for small-value payments, cash payments represented 40 percent of the number of payments made by the survey participants but only 14 percent of the total value of the payments.
  • Cash clearly dominates the small-value segment under $10.
  • Cash was the payment method used in two-thirds of person-to-person (P2P) payments.
  • The use of cash in P2P transactions is different from other cash transactions; P2P transactions are two-thirds higher in value ($35 versus $21) than other types of expenditures.
  • While 51 percent of the adults in the 18–34-year-old age group indicated that debit cards are their most preferred payment method, cash followed closely at 40 percent for the 18–24 year olds and 31 percent for the 25–34 age groups. Will the 2015 results show a departure from this finding?

It is clear that the United States is a long way from becoming a cashless society despite the predictions of many over the last twenty years. The 2015 results will provide important information as to how cash continues to be used by the general population and the emerging millennials segment in particular.

So is there cash in your wallet? I bet there is and will be for quite some time.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

October 19, 2015 in cards, checks, currency, payments | Permalink | Comments (0)

October 5, 2015

Don't Let the Absence of a Fat Dog Scare You

Halloween, not at all my favorite holiday, looms. On this "hollow day" we commonly celebrate the ghastly—ghouls, ghosts, goblins and gloom—and with ever-increasing fanfare (when did lights get to be important for Halloween?). It's not clear to me what upside there is to focusing on that which encourages us to be frightened, worried, or just plain grossed out. This is especially true for those who work with or are responsible for retail payment systems. From cyberattacks and data breaches to basic fraud and theft, there is plenty to haunt and drive us to an early grave.

Today, I offer no solution to the threats; they seem to be ever with us. When bad things happen, and they almost surely will, one of our most important choices relates to reporting. To get to where I'm going I'll share a text series my son sent recently to report an incident at the house. His messages were as follows:

Absence of a fat dog

The trouble with security incidents is they don't come with a fat dog to vacuum up the mess. One of the trickier messes is in the reporting. What should be reported, to whom should it be reported, and when?

My first instinct is to say that when something goes awry, err to the side of reporting—early and often. I have said so in a previous post. Alas, it's not that easy; there is no fat dog to clean up the mess. Realizing that, I feel compelled to correct my earlier thinking or to at least offer a more nuanced view.

One can agree or not, like it or not, but the truth is notification obligations are not triggered by every security incident. What has to be reported and when varies by state as well as circumstance. That's grist for another blog. For this one, just note that one often has choices. What if bad consequences such as reduced sales or damaged reputations could have been avoided by not talking out of turn? It's not wrong to ponder that.

There are other arguments to be made against early reporting. For instance, early understanding may (likely will) need to be amended. The amendment could be dramatic if additional forensics make clear that initial conclusions or thoughts were incomplete or simply incorrect.

The other side is that erring in favor of the "early and often" principle or sacrificing self in the interest of others is "the right thing to do." I recently heard a person say their company chose to be public and transparent about a breach of theirs, in spite of incomplete information. The speaker said it was the right thing for them, in that instance. He also said it couldn't be a rule. His rule was that the CEO needs to be comfortable with what is decided because somebody is harmed no matter what the decision.

The resolution is an incident response plan. Be committed to developing a well-conceived one. Don't think your firm is too small for one. Knowing options like whether or not notice is required (and when) could prove priceless as could considering all the communication decisions in the absence of heat that accompanies a real incident. If incident response plans are already in place, test key decision makers with realistic exercises that include wide-ranging communication scenarios and find out what doesn't work for the company. Fix what is discovered before the storm hits.

Alternatively, I have a fat dog that doubles as a vacuum. Price is negotiable but any sale is final.

Photo of Julius Weyman By Julius Weyman, vice president, Retail Payments Risk Forum at the Atlanta Fed

October 5, 2015 in data security | Permalink | Comments (0)

September 28, 2015

I Want My Two Dollars!

Dizziness and nausea come over me sometimes when I have to pay individuals. My mind scrambles. I don't carry cash or have checks. What grueling, lengthy steps will I have to go through to pay this person? Besides worrying about forgetting to meet my financial obligation if I don't pay right now, I find myself crossing my fingers behind my back hoping they have the same mobile app as I do. Or maybe we use the same bank, with any random luck. I picture myself as Layne Frost, the character played by John Cusack, from the movie Better Off Dead, with the paperboy at my doorstep insisting, "I want my two dollars!"

From bartering to exchanging livestock and shells, from cash and coin to checks and now mobile, it is inevitable that people will always find a way to pay and be paid. Forrester Research forecasts that the U.S. mobile peer-to-peer (P2P) market will grow to nearly $17 billion in transaction value by 2019. Yet the United States P2P payment volume by instrument is still largely cash-based, followed by check. Forecasters are planning on migration from over 6 billion cash and 2.1 billion check P2P transactions to the mobile space. Who will win the lion's share of paper-based P2P payments as people embrace electronic payments?

Let's look at the P2P payment lifecycle before you make your predictions:


My expectation is that everyone in the P2P space today faces challenges in getting there from here. Some will have a handsome share of the market but in doing so may suffocate opportunity for ubiquitous solutions that will benefit consumers nationwide. Fragmentation is our obstacle in P2P today. If both Ps don't have something in common (for example, financial institution, phone manufacturer, mobile application, social media, branded debit card), then the payment can't occur and...back to the basics we go. Cash and checks are accepted by almost everyone. Moreover, cash eliminates the middle part—cash means finality of good funds, sender to recipient, instantly.

All P2P access channels, or funds load, providers who offer accounts to consumers—whether these providers are financial institutions; virtual wallets like Google and Paypal; mobile/online applications like SquareCash, Venmo, or Dwolla; or prepaid accounts like Bluebird or NetSpend—should be able to access a directory to process payments from anyone to anyone. Ubiquity means debit card or not, banked or unbanked, same state or not. This can be achieved when financial institutions cooperate through open access to a directory, since all nonbank P2P providers ultimately use a bank to conduct the business of processing payments.

There is an option that could surpass directory deliberations. Bitcoin's blockchain technology, like cash, can eliminate middle participants—like cash, it is finality of good funds, sender to recipient, instantly. Perhaps the directory will be technology nonpartisan and connect all payments. Until then, I'll keep crossing my fingers when the paperboy shows up.

Photo of Jessica J. Trundley By Jessica J. Trundley, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 28, 2015 in P2P, payments | Permalink | Comments (0)

September 21, 2015

Mimicking Mother Nature

A few months ago, we had a large colony of bats take up residence in our house. With the issue now resolved, and with everything we had to do to get rid of them, I realize how the whole experience was similar to the tactics of fraudsters and the challenges faced by their victims in taking preventive, detective and corrective action.

We learned of the initial intrusion purely by accident. Previously, we have never had any sign of vermin being able to gain entry, so I thought we had a solid defense. My wife had noticed a small amount of droppings on the back porch but we thought they were from squirrels. Imagine my shock when my adult son informed me we had been invaded by bats. He had discovered them one morning following an overnight stay. Departing for an early tee time, he noticed a swarm of bats flying into a soffit vent crevice. Incredulous, I waited for dusk only to see for myself a constant stream of small brown bats exiting the soffit crevice.

My wife went a little bat crazy as she imagined hoards bats swooping down to carry off one of our grandkids. Actually, she was more concerned about the real threat of respiratory disease from their droppings as well as the potential for rabies. We began to do some research, and I soon learned that bats are a protected species, so they cannot be disturbed unless they are posing an immediate health threat. They weren’t, since they were not in our living space. But the problem intensified, which I realized one evening when I saw an even larger colony emerging from our chimney.

We began contacting companies that specialize in wildlife removal. We found a wide variety of suggested courses of action and prices. We selected one company based on its reputation, process, guaranteed results, and pricing. The company’s first step was to inspect the entire house to identify any other potential points of entry and to seal them. We notified our neighbors so they could be on the lookout to make sure the bats didn’t settle inside their houses. The next step was to install one-way excluders that would permit the bats to leave but not get back in. This seemed to be working well until a group of the bats somehow got word they were being evicted. Trying to find another way into the house, they navigated an interior wall and became trapped. Without water, they soon died and a putrid smell began to emerge. After cutting several holes in the wall, the technicians were able to locate the source and remove the carcasses. After a couple of weeks, the excluders were removed and the entry points sealed so we thought the problem was resolved.

Imagine our further surprise when we returned from vacation and found about 50 dead bats in our unfinished basement. It seems a group had remained and found a chase route from the attic to the basement seeking water. With the disposal of those bats, the problem seems to have finally been resolved. As fall approaches and bats migrate to warmer climates, the threat diminishes, but I can assure you we will be on the alert next spring.

So how does this relate to the payments fraud environment? Some similarities:

  • We thought we had a strong defense perimeter and were safe, but the bats found a way inside given they require an opening of only three-eighths of an inch.
  • While our discovery came shortly after their initial entry, it was only by sheer luck. We could have acted earlier if we had not ignored the early warning sign of their droppings.
  • We thought we had identified the sole location of the problem, but they then migrated to a second entry point.
  • Regulations limited the potential range of actions we could take to deal with the issue.
  • We shared information about the situation with our neighbors so they could be on the alert.
  • We analyzed several different options for dealing with the issue and preventing its recurrence.
  • Despite what we thought was a successful process, other issues arose and required action before there was a final resolution.

This experience with Mother Nature has provided us a learning opportunity and we are better informed and on the alert for future such events.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 21, 2015 in fraud, regulations, risk, risk management | Permalink | Comments (0)

September 14, 2015

The Cost of Free Wi-Fi

When I was a teenager, my friends and I were often on the prowl for bargain restaurant offers. The all-you-can-eat buffet at our local Chinese restaurant was a favorite, but every so often we would discover a "free meal deal." We were once reminded by my friend's dad that "nothing in life is free." That quote left a lasting impression on me.

The validity of this quote was hammered home recently during a security discussion I had with a friend on connectivity to the Internet through free public Wi-Fi. Though free public Wi-Fi is, well, free, it has "soft" costs tied to the lack of security in the connection. And these soft causes can quickly lead to the "hard" costs of fraud—from theft of personal information, user names and passwords, or payment credentials, since hackers are easily able to intercept data transmitted over the Wi-Fi network. Beyond this method, which involves a legitimate network, fraudsters can also deploy rogue Wi-Fi networks for the sole purpose of stealing information. And then, once they have that information, the fraudster can use it to access your accounts under your identity.

This does not mean that people shouldn't use free or public Wi-Fi. When I am away from my home, whether I'm at a local coffee shop or on the road at a hotel, I often seek locations with free Wi-Fi. Apparently, I am not the only one. A recent survey by a U.K. hotel chain found that free Wi-Fi was the most important factor for its customers when choosing a hotel. Free Wi-Fi even ranked higher than a good night's sleep!

However, using free public Wi-Fi and trusting it are two different things. It should never be trusted, and therefore users should do everything to protect themselves and their information. Before joining a free public Wi-Fi network, users should ensure that it is a legitimate network offered by a legitimate entity such as a business, municipality, hotel, or airport. Criminals often will use deceptive Wi-Fi names to trick users into choosing bogus Wi-Fi networks, so users should pay close attention to signage promoting Wi-Fi networks or ask staff for help in identifying legitimate networks. The Federal Trade Commission offers detailed advice on protecting yourself against Wi-Fi security risks once you are connected, including:

  • Use a virtual private network, or VPN.
  • Use SSL-encrypted connections by enabling the "Always Use HTTPS" website option.
  • Turn off file sharing.

These risks are not just limited to free public Wi-Fi networks. They are also inherent to any public Wi-Fi network, including paid networks such as the in-flight Wi-Fi that many airlines offer. It is imperative that users of public networks take the necessary steps to safeguard their information, especially while conducting financial transactions. As free public Wi-Fi spots continue to proliferate and more financial transactions move to connected devices, rest assured that fraudsters will continue to exploit this communications channel. Educating users on how to protect themselves using public Wi-Fi is critical to safeguarding financial information.

What are you doing to bring awareness to your customers about public Wi-Fi risks?

Photo of Douglas A. King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 14, 2015 in online banking fraud, payments risk | Permalink | Comments (0)

September 8, 2015

Why Is the U.S. Card-Present Fraud Breakout Not Present?

Before answering the question the title poses, let me introduce myself. I'm the newest blogger in the Risk Forum. Recently, I was the faster-payments-product guy in the Retail Payments Office (RPO) at the Atlanta Fed. While in the RPO, I was a cheerleader who pushed and cajoled the industry to get same-day ACH off the ground. Incidentally, same-day ACH is due to become available universally as early as September 2016 due to a recent rule change passed by NACHA.

Back to my question—while doing some research on expanding fraud data coverage in the Fed's upcoming triennial payments study, I came across a gap in publicly available detailed fraud data for the United States compared to other geographies. As the table shows, the gap is evident from the Fourth Report on Card Fraud published in July 2015 by the European Central Bank. You probably see the "Not available" designation in the card-present subcategory.


What gives? What could be gained if this information were made available? As the footnote shows, the high-level data is taken from the Fed's last triennial payments study published in 2014. And as a previous post notes, the United States does not have a publicly available, single, uniform repository for payments fraud data. Back in 2009, the problem was covered in detail in the briefing paper "The Benefits of Collecting and Reporting Payment Fraud Statistics for the United States" by my colleague Rick Sullivan from the Kansas City Fed. In fairness, it should be noted that information is available in the United States to varying levels of detail as a paid service or through surveys conducted by such organizations as the Association of Financial Professionals and is typically distributed only to the organization's membership.

So that you know what we are missing out on in the United States, here are capsule descriptions of each card-present fraud type:

  • Counterfeit/Skimming: Fraud is perpetrated using an altered or cloned card.
  • Lost/Stolen: Fraudulent transactions result from the use of a lost or stolen card.
  • Card not received: A newly issued card in transit to a card holder is intercepted and used to commit fraud.
  • Fraudulent application: A new card is issued based on a faked identity or using someone else's identity.
  • Other: This is a catchall category for fraud not covered above.

The card-not-present subcategory, which is fully reported on in the triennial study, generally covers fraudulent payments initiated online, or by mail or telephone. Unlike card-present fraud, this type of fraud is not usually subdivided any further.

It should be noted that the current study was the first of the triennial series to report on fraud. Unfortunately, scope limitations precluded breaking out fraud further. As it is, the current study offers a wealth of payment and fraud data for cards and all other forms of noncash payments.

Adding a level of specificity for card-present fraud in the United States will help in tracking the movement of fraud from one type to another and the migration of fraud to other countries. In the United States, fraud is likely to further shift from card present to card not present due to increased counterfeiting controls at the point of sale from the anticipated broad adoption of EMV (chips) for cards and POS terminals. The Federal Reserve, in partnership with other payment system stakeholders, hopes to track these and other developments by collecting additional fraud data for the next triennial study due to be published in 2017.

What suggestions do you have for identifying and collecting other fraud data?

By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 8, 2015 in EMV, fraud | Permalink | Comments (0)

August 31, 2015

A Swing and a Miss

"Keep your eyes on the ball." I'm guessing my son heard those words at least 20 times a game this past baseball season. If you can't follow the ball, then your chances of a successful plate appearance are pretty slim.

Departing from the usual risk-related prose and taking a signal from the blog's name Take On Payments, I want to offer my thoughts on mobile payments. This topic floods my payments news feeds and is the subject du jour at nearly every payments-related event. Mobile payments can mean many things to many people, but one of the hottest areas is mobile at the point of sale (POS), also known as proximity payments—that is, what Apple Pay, Starbucks, and Samsung Pay among others all offer.

And this is where I think the payments industry is taking its eyes off the ball. Why do consumers want to use mobile phones to replace cash or cards at the POS? A key barrier cited by consumers who have not adopted mobile proximity payments is their satisfaction with current payment methods. So what is the best way to get consumers to use their mobile devices to replace cash or cards at the POS?

The mobile phone has significantly changed the way people interact. It's almost comical to me that the device has retained the word phone. While there will always be people who want to hear a voice or interact directly with another person, the mobile device is turning us into a society that prefers messaging over speaking and interacting through the device rather than face to face. (My nieces text each other while sitting in the same room!) Furthermore, we have come to expect information to be readily available to us whenever and wherever we desire it. People don't like waiting, and the mobile device has intensified this impatience. To understand consumer behavior in light of this mobile revolution, we don't have to look any further than the reduction of bank branches and staffing coupled with the rise of mobile banking solutions.

Yet the proximity payment solutions don't address consumer behavior with their mobile devices. I understand merchants valuing the ability of proximity payments to provide loyalty programs and targeted offers, but do these extra services really address consumers' core needs and wants? It seems to have worked for Starbucks in a closed-loop environment but has yet to be replicated in an open-loop environment. (Closed loop means that the payment is usable only at a provider's place of business, as for the Starbucks app. Open loop means the payment, like Apple Pay, is usable anywhere that has the infrastructure to read the app.)

By keeping the focus on the consumer, it seems to me that the mobile payments industry can work on reducing the physical interaction of payments and current wait times associated with the payment process. Uber, Chipotle, and the Starbucks mobile app are evolving to address these consumer needs. These apps essentially remove the payment from the POS (some would say that they make the payment invisible) and allow for minimal personal interaction and waiting times.

Hence, I predict the growth of mobile payments will come not from the POS but rather through mobile in-app payments. That's where I'd be setting my sights on the mobile payments diamond. Perhaps this will create a healthy discussion (hopefully not a bench-clearing brawl), but I think mobile at the POS is a swing and a miss. What do you think?

Photo of Douglas A. King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 31, 2015 in innovation, mobile payments | Permalink | Comments (0)

August 24, 2015

Payroll Cards at Interstate Speed

State lines happen fast in New England, which is where I call home. In this part of the country, it's not uncommon for people living in one state to commute for employment to a neighboring state. One could pay property tax enjoying the motto "Live free or die" (New Hampshire) while paying income tax to the Bay State (Massachusetts). Employees may not take much notice of state employment law, but employers almost certainly do. I'm thinking that minimum wage, tax rates, and corporation law would be key factors for an employer to consider, but do payroll card laws also fit into the evaluation?

Payroll cards are prepaid cards onto which an employer loads wages. They offer an alternative to paychecks or direct deposits, and are subject to a different sort of regulation. Outside of a federal law prohibiting an employer from mandating the exclusive use of a payroll card, states are generally free to develop their own legislation governing payroll cards. In Maine, for example, employers can offer payroll cards if they give their employees free access to full pay. Connecticut goes one step further, requiring employers to provide certain disclosures and prohibiting overdrafts and certain fees. Massachusetts does not have any law for or against payroll cards. Somewhere in the middle is Vermont, which allows payroll cards with certain disclosures as long as employees receive three free transactions monthly. Proposed New York legislation would go so far as to require employees to sign a written consent form—printed with a large, 12-point font—to be retained for six years following the cessation of the employment relationship.

And that's only in my home of New England. Out of 50 possibilities, I've mentioned only fragments of only five state laws. Outside of this area, payroll-card-related legislation is being introduced or pending in 12 states.

Regulation E has covered payroll cards since 2006. Regulation E includes (i) protection to employees so they do not have to receive wages via electronic funds transfers with a particular institution; (ii) access to statements, balances, and transaction histories; (iii) clear and conspicuous disclosures; and (iv) error resolution and limited liability. In January 2016, we expect the final version of the Consumer Financial Protection Bureau's Rule on Prepaid to be published.

Because payroll cards are already covered under Regulation E, only two significant issues are applicable in the pending rule. First, credit and overdraft services, while not prohibited, will be subject to compulsory use provisions and Regulation Z's definitions of credit and periodic statement requirements. Second, disclosures will carry a bold print warning, "You do not have to accept this payroll card. Ask your employer about other ways to get your wages."

What federal regulation doesn't touch is the type and amount of fees assessed on payroll cards. Regulation E provides only that fees are disclosed. Certain industry stakeholders such as National Branded Prepaid Card Association, Consumer Action, MasterCard, and the Center for Financial Services Innovation have worked to develop industry standards. Simply speaking, most agree that cardholders should have access to full wages each pay period without cost and that they should be able to perform basic functions without incurring unreasonable fees.

Best practices give the industry the ability to fill gaps and stay nimble to changing technology, fraud schemes, and consumer needs. The CFPB even says in their proposed rules, "Employees may not always be aware of the ways in which they may receive their wages, because States may have differing and evolving requirements." Does state-by-state regulation ultimately fill the gaps needed, especially in a system that crosses state lines so often?

And in case you didn't know it, National Payroll Card Week starts September 7, a day that also happens to be Labor Day.

Photo of Jessica J. Trundley By Jessica J. Trundley, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 24, 2015 in prepaid, regulations, regulators | Permalink | Comments (1)

August 17, 2015

Pigskin and Payments

For those who know me well, they know that I find August to be the slowest-moving month of the year. It's not because of the oppressive southern heat and humidity, but rather it's my anticipation for football season. To help speed along the "dog days of summer," I generally read my fair share of prognostication publications. Alongside the predictions, improving player safety has become a key discussion topic as the season approaches.

Armed with data showing an increase in injuries as well as long-term negative effects from playing the sport, football's governing bodies on both the collegiate and professional levels are instituting rule changes to make the game safer. Equipment manufacturers are introducing new gear to improve safety and individual teams are adding new experts to their medical staffs all in the name of player safety.

Ironically, while there is a focus on improving player safety, football players continue to get stronger and faster aided by advancements in nutrition and workout regimes. As player strength and speed improves, this contact sport becomes more vicious and dangerous. And as a fan, I'll admit that I find watching a game featuring stronger and faster players more exciting. I do not want to see players injured, but at the same time I enjoy the excitement that comes with hard tackles and big hits.

Does this state of football sound at all like the current state of the U.S. payments industry? To make payments safer, public and private entities are leading literally hundreds of initiatives across various payments rails. Network rule changes are taking place and new technologies are being harnessed all in an effort to better secure payments. At the same time, start-ups, established payment companies, payment associations, and the Federal Reserve are collaborating to improve the speed of payments.

It's hard not to get excited about the possibilities of faster payments, from important just-in-time supplier payments to simple repayments for borrowing money from a friend or family member. However, can securing payments better derail the speed of payments? By way of example and personal experience, my more secure EMV (chip) credit card has clearly reduced the speed at the point-of-sale for my card payment transactions.

But just as player strength and speed has evolved alongside safety through rule-making and technology (think about leather football helmets here), I think we have seen the same progression within the payments industry. I think football remains as exciting as ever, and the payments expert in me is clearly excited about the future of payments.

Speed and safety are not to be viewed as mutually exclusive, and I am confident that the payments industry supports this view. In both football and payments, elements of risk will exist, regardless of safety measures in place. Finding the right balance between speed and safety should be the goal in order to maintain an exciting football game or efficient payments system. I can't wait to see what lies ahead on the gridiron and within the payments industry.

Photo of Douglas A. King By Douglas A. King, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

August 17, 2015 in emerging payments, EMV, fraud, innovation, risk management | Permalink | Comments (0)

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