Two national task forces are working on possible solutions to improve the speed and security of the U.S. payment system, which is challenged by escalating threats and evolving technology.
Convened by the Federal Reserve, one task force is focused on faster payment capabilities, while the other is working to enhance payment system security. A total of 500 members serve on the task forces, which are focusing on identity management, data protection and information sharing, among other areas.
The Strategies for Improving the U.S. Payment System paper, released January 2015, served as the genesis for the creation of the task forces that were convened last year, according to Connie Theien, director of payments industry relations for the Federal Reserve System.
While conducting a periodic assessment of the payment environment, “we observed a lot of trends affecting businesses and consumers and how they go about using payments,” Theien said.
New technology
“People’s expectations have changed,” Theien said. “Technology has enabled people to get information in real time and to manage their life and their finances in real time, and to conduct commerce using technology in a remote way in a different time horizon.
“So we issued this paper in 2015 that focused on how we can collaborate with the industry to enhance the speed, effectiveness and safety of the system end to end.”
A call was issued for stakeholders from every corner of the industry to serve on the task forces.
“Of those 500 people, we have financial institutions from tiny main street banks all the way up to the largest global financial institutions,” Theien said. “We have consumer interest organizations. We have corporate professional treasurers who manage corporate finances to merchants like Target and Walmart participating.
“We have the high-tech Silicon Valley firms, some of the folks who are providing new and innovative payment services to end users and large technology hardware, software and other service providers,” she added. “We have a real diversity of participation, which we think will lead to the best outcomes because everyone’s needs and perspectives are represented in designing these enhancements.”
The Faster Payments Task Force goal is to evaluate alternative approaches to bring quicker real-time payment capabilities to the nation. “This is where the objective is looking at how can we enable for me to pay you for the lunch we just shared or the football tickets that you brought [by allowing] me to pick up my phone or go online and send $50 and instantly move it from my bank account to your bank account,” Theien said.
To move forward, 320 members agreed on 36 criteria that describe what an effective future payment system should look like. Five criteria are about speed. The other 31 are about efficiency, standards, interoperability, governance and regulations, and safety and security that should exist in real-time payment systems.
The task force solicited design and solution ideas and are assessing and reviewing 19 of them. That process is confidential until the report is issued, which will include recommendations and next steps for the industry.
“What is important to understand is the task force isn’t picking a solution, they are just evaluating the solutions the people in the market has bought forward,” Theien said. “This collaborative work is sort of happening in parallel to inform the marketplace on solutions they might be looking at in terms of the criteria, but also to be talking about where do we need to work together as an industry.”
Security challenges
The work of the Secure Payment Task Force includes playing an advisory role to the Faster Payment Task Force as 11 of the 36 criteria address safety and security. The broader focus is to look at all of the existing payments systems in the U.S. as well as some security challenges, identify priorities and develop solutions.
Led by payment industry experts, work groups created by the Secure Payments Task Force focus on priority areas. One area is payment identity management, which addresses identity theft and some of the challenges businesses have with corporate account takeovers. A second work group is looking at data protection, since so many businesses and individuals have been affected by data breaches.
The third working group focuses on information sharing within the industry to help prevent and mitigate fraud. They are looking at “how can we better share info about threats that we are seeing or types of fraud so that we can act more quickly and more effectively,” Theien said.
Sophisticated cyber threats and increased points of vulnerability make protecting transactions and payment systems a priority for “financial institutions, merchants, payments providers and central banks around the world,” Todd Aadland, a Federal Reserve Bank of Chicago senior vice president and Payments Security Strategy Leader, said in an email statement.
“Significant resources must be focused on mitigating current and emerging risks by improving authentication of transactions, parties and equipment in the payment process, in addition to actively pursuing ways to protect sensitive information and limit its use and availability,” said Aadland, who is chairman of the Secure Payments Task Force.
The Faster Payment Task Force will finish its work by the middle of 2017. No firm completion date has been set for the Secure Payments Task Force.
Freelance writer Robin Farmer contributed to the writing and the research of this article.
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