Fed to Unveil Plan for 'Fast Payments'Strong Authentication Would Play a Key Role
The Fed's research confirmed interest among consumers and businesses in a faster U.S. payments system, similar to the Faster Payment Service already running in the U.K., Wells says in an interview with Information Security Media Group at the Fraud Summit Chicago.
"Clearly, there's a recognition that faster payments would be beneficial in a lot of use cases," she says. "There's still a lot of use for checks and ACH, but there's also a need for more instant payments as well."
Wells stresses that the Fed won't mandate that banks and credit unions move to a new fast payment mechanism. "We've studied different ways that this could be accomplished in this country given our payment ecostructure," she says. "We're going to put some suggestions out for how we think it might be able to be accomplished."
A move to faster payments would require security enhancements, Wells acknowledges.
"Our thought is that because of the risk of fraud that is heightened with instant payments, especially if there was instant settlement, that there would absolutely need to be heightened authentication," she says. "And we've seen that in other countries as well. The U.K., in fact, has had good success with two-factor authentication for these types of payments."
In the interview, Wells:
- Acknowledges that creation of a fast-payment system would require that banks and credit unions conduct back-office retooling. "Clearly that's not an easy thing to do, and it's costly. We want to be thinking whether the investment is going to be paying off over the longer term. Our view on that is, yes, it probably would."
- Comments on how the U.S. payment system will evolve over the next five years;
- Points to updates on the project at fedpaymentsimprovement.org.
Wells is vice president, risk officer, for the Federal Reserve Bank of Chicago. Previously, she was an assistant vice president in the financial markets group, where her work focused on policy issues related to risk management in derivatives clearing and settlement and innovations in general purpose payment systems. Before joining the Federal Reserve Bank of Chicago, Wells was a vice president for payment system strategy at Wachovia Corp., and a senior policy analyst in the payment risk area at the Board of Governors of the Federal Reserve System.