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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.

Take On Payments

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February 23, 2009


Why should I work with you?

At some level, we're all selling something, even if it's just ourselves. Everyone has a reputation and a résumé to build. Information is power. We all have bosses to please, goals to meet. So when and how do these stars align such that we can work together?

Payments is a network industry with chicken-and-egg problems. It requires someone to step forward, perhaps to risk losses, in order to build networks of users and providers that enable a payments network to operate. Think of a simplistic credit card network—users need to know that merchants will accept it, banks need to know that they can make money to provide the lending that backs it, and merchants need to know that they'll be compensated with business in order to justify the costs.

The same dynamics apply to those who are minding the store when it comes to addressing risk and fraud in payments networks. Who's willing to step out (at some risk) to take on the tough challenge of pulling the variety of industry, regulatory, law enforcement, merchant, and consumer interests together? Where's the money to be made? Where's the competitive advantage?

In the best sense, law enforcement is imbued with an altruistic drive to do good by catching the bad guys, and bank supervision is all about ensuring a safe and sound banking system.

In the best sense, payment services providers seek to provide a safe and efficient environment for the exchange of value. But will any service provider risk exposure to reputational and other risks just because it's good for the payment system?

Payments is also an industry that offers opportunities to leverage positive "network effects"—the more users of a payment mechanism make it more valuable for all as it becomes more ubiquitous, commonly understood, and efficient. The same network dynamics should apply to those who are minding the store when it comes to retail payment systems risks.

All these interests and perspectives can align if we are realistic in our approach to interest alignment and continue to collectively look for opportunities of mutual benefit.

Where do you see alignment and opportunity?

By Clifford S. Stanford, assistant vice president and director of the Retail Payments Risk Forum at the Atlanta Fed

February 23, 2009 in bank supervision, banks and banking, financial services, risk | Permalink

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February 2, 2009


Welcome to Portals and Rails

It is my pleasure to welcome you to Portals and Rails, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta. The purpose of Portals and Rails is to encourage ongoing dialogue on emerging issues in retail payments and to inform and guide the work of the Retail Payments Risk Forum.

The Retail Payments Risk Forum was established to address the challenges faced by the industry, bank regulators, and law enforcement in managing retail payments risks and to enhance collaboration among these parties to detect and mitigate fraud. As the U.S. retail payment systems continue to shift from paper to electronics, bringing with them the introduction of innovative payment instruments and channels, the risk profiles of payment participants are also shifting. The most recent Federal Reserve payments study, conducted in 2007, revealed that the use of electronic payment methods is growing rapidly in response to technological advances in computing power and telecommunications, as well as changes in user preferences. This growth is accompanied by increased nonbank participation in payment systems. While nonbanks play a vital role in a variety of different payment activities, their increased role in retail payment systems introduces new and often unanticipated risks.

All this is not to say that legacy payment instruments and channels are outside the scope of our radar. Paper and electronic checks remain important components in the retail payments landscape and unfortunately are increasingly products targeted by bad actors as entries to retail payment systems to conduct fraudulent transactions. The Retail Payments Risk Forum is initially focusing on trends in checks and in the ACH network, drawing on the expertise housed within the Federal Reserve System's Retail Payments Office, also geographically situated at the Federal Reserve Bank of Atlanta. The Retail Payments Risk Forum will seek out opportunities for collaboration with other existing forums, such as those for card-based payments, where appropriate.

To meet the challenge of addressing the myriad new risks in retail payment systems, the Retail Payments Risk Forum has established Portals and Rails as a means of introducing ideas, asking questions, and facilitating communication among interested parties on various topics relating to retail payments risk and fraud. We hope Portals and Rails provides you a virtual arena for collaboration and discussion of issues of common interest.

We encourage your participation in Portals and Rails and look forward to ongoing collaboration with you.

By Richard R. Oliver, executive vice president at the Atlanta Fed.

February 2, 2009 | Permalink

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Retail Payments Risk and Fraud: Detection and Mitigation

The Retail Payments Risk Forum hosted a conference titled "Risk and Fraud in Retail Payments: Detection and Mitigation" at the Federal Reserve Bank of Atlanta on Oct. 6–7, 2008. This conference provided a collaborative forum to facilitate information sharing among experts and foster improved detection and mitigation of retail payments risks and fraud in check and automated clearinghouse (ACH) payment systems. Experts from banking agencies, state and federal law enforcement, NACHA, the ACH operators, and others explored barriers and discussed opportunities. The meeting leveraged the assembled expertise to identify opportunities for further collaboration.

Three expert panels discussed themes regarding third-party risks in retail payments, enforcement actions, and consumer protection concerns. Participants were then asked to discuss key topics in smaller breakout groups, including information-sharing limitations, policing bad actors, collaborative opportunities, substantive areas of concern, and the role of the Retail Payments Risk Forum.

The proceedings of the conference are summarized in the full-length conference summary, which can be found as text or pdf. We encourage you to review the conference summary and also to provide any comments you may have within Portals and Rails. In particular, we want to know what you thought of the topics addressed. Did the discussions reflect your understanding of the issues? Did we miss anything? What topics would you like to see addressed in future such events? How do we best ensure ongoing collaborative work among industry, regulatory, and law enforcement parties in the detection and mitigation of retail payments risks and fraud? Your thoughts are very valuable to us!

By Clifford S. Stanford, assistant vice president and director of the Retail Payments Risk Forum at the Atlanta Fed.

February 2, 2009 in ACH, bank supervision, banks and banking, checks, financial services, risk | Permalink

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