Business Credit Magazine July/August 2014 | Page 8

I N T H I S I ss u e Brian Shappell, CBA, CICP A Fed Unveils Preliminary Payment System Priorities At Credit Congress, NACM was pleased to host the Federal Reserve’s Financial Services Division presentation of initial findings from its survey and year of research on US payment systems for the first time. The findings indicate that businesses overwhelmingly believe the payment systems need to evolve, and fast. “The message we are getting from people is that ‘sooner is better.’ The US, from a payment perspective, is starting to fall back a bit,” said Dan Gonzalez, vice president of industry engagement and awareness for the Federal Reserve Bank of Chicago. Preliminary results from the Division’s study indicated that speed was a top concern overall and that businesses were more than twice as likely to be willing to spend more money for payment speed improvements than consumers (75% to 33%). “It feels similar to the airline industry. If you want to get on the plane faster, you pay to do that,” Gonzalez said. “If there is value, businesses are willing to pay.” “The message we are getting from people is that ‘sooner is better.’ The US, from a payment perspective, is starting to fall back a bit.” It would certainly help in instances where buyers want their product immediately. Multiple conference attendees recalled instances where customers wired a payment and soon after sent a truck for pickup. Oftentimes, the funds weren’t confirmed by the bank as available as quickly and, to the chagrin of the customer, the truck was sent away. Though speed is important, those in trade credit favor improvements based on security more. Driving this preference is the prevalence of both consumer and business based payments happening at the touch of a smart phone or tablet button. “If we’re going to start using these devices, what does it mean from a security perspective?” Gonzalez told Credit Congress delegates. “This needs to be looked at holistically. If we give people new ways to perpetuate fraud, we’re not helping the US payment system. So we’re taking a deep dive on this to ensure we are safe 6 B usiness C redit J uly / A u g ust 2 0 1 4 and secure.” Doing so will take more research and more time than originally expected, Gonzalez admitted. Results of the survey included: •  Sixty-seven percent of businesses won’t use a payment method unless it is widely accepted, suggesting a lack of trust in the system. •  Eighty-one percent of business indicated they would rather share an email address or a phone number to make and receive payments to avoid divulging sensitive bank account information to the payee. •  Merchants expressed the desire for governance in the payment system structure that allows them to have more influence. Gonzalez called the last of the findings the most surprising. “There was broad support for the Fed’s efforts to improve the US payment system…and people want more activity,” he said. A common suggestion was that the Fed become more active in developing and implementing standards. Survey participants showed little interest in paper checks and internationals payments. Check use is on a downward trend, but remains a big part of the US payment landscape. “They are starting to live off of electronic devices; they check their balance instantly before they swipe a card,” Gonzalez said. As for international payments, survey respondents didn’t want to focus too much outside US borders at the moment, citing the number of financial institutions and the complications among them. They prefer to keep an eye on it, rather than make it a priority, Gonzalez said. The Fed will continue its studies throughout the summer, and has tentatively scheduled the release of a white paper to serve as an action plan for September. While the Fed is optimistic that the roadmap will do a good job of laying out the actual, eventual process of change, Gonzalez reminded the audience that the Fed may need to approach Congress “to get this fixed,” and that’s where things could get truly complicated. Brian Shappell, CBA, CICP, NACM staff writer can be reached at [email protected]. Visit www.FedPaymentsImprovement.org for more information on the Fed’s ongoing efforts.