The Fed Drives Ahead With Payment Rail Exploration

The Federal Reserve is paving the way for new payment infrastructure to drive progress in the U.S. landscape, both through an expansion of the FedNow pilot, as well as the exploration of a possible Fedcoin digital currency. But other innovators like Visa and the ACH Network are taking existing rails to drive payments speed and efficiency.

FedNow Expands Its Real-Time Pilot

The Federal Reserve’s in-progress real-time payment network, the FedNow Service, is expanding its pilot with the addition of new participants. This week, CGI revealed in a press release it will collaborate to test the service, connecting its client Vantage Bank Texas to use real-time payment capability for its own customers. CGI said it will make the integration possible through its CGI All Payments offering, a payments platform for banks to launch new payment services by accelerating network connectivity and deployment.

Also participating in the FedNow Pilot Program is Jack Henry & Associates, which similarly connects financial institutions (FIs) to technology to streamline access into new payment networks. The company’s JHA PayCenter will allow banks and credit union clients of the company to use the FedNow Service with the goal of obtaining feedback on the infrastructure as the Federal Reserve gears up for a full rollout of the real-time payments offering by 2023, according to a separate press release.

Federal Reserve Probes ‘Fedcoin’ Opportunity

While the Federal Reserve presses ahead with its real-time payments network development, it is also exploring the opportunity in so-called Fedcoin, an electronic alternative to paper currency that is raising concerns among business leaders, according to Bloomberg Businessweek. In collaboration with the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology, the Fed is researching and developing the creation of a digital dollar platform.

Some organizations are reportedly concerned about potential negative impacts of the technology on their profits, while other stakeholders in the payments and finance landscape, including Visa and Mastercard, are eager to ready their own infrastructures to ensure that their services can support any digital currency that may emerge.

Neither the U.S. Department of the Treasury nor the Fed have legally approved for any virtual currency to launch in the country, and it would likely be years before that occurs. It’s also unclear how, exactly, the technology operates, or whether it would use blockchain as its underlying infrastructure in the way that cryptocurrency does.

Visa Supports Settlement In Cryptocurrency

In a major win for the cryptocurrency space, Visa announced that it will support transaction settlement in dollar-denominated stablecoin, making the company the first payments network to do so. Visa Vice President and Head of Crypto Cuy Sheffield said the initiative aims to allow businesses to explore new cryptocurrency-based business models without having to toggle funds between crypto and fiat. Visa would settle the crypto funds in the same way it already does for 160 fiat-denominated currencies over its existing payment rails.

“This is a way that Visa is continuing to bridge digital and traditional fiat currencies,” Sheffield explained.

Nacha Marks Same Day ACH Expansion

Just as Visa is looking to promote innovation using its existing rails, Nacha is similarly driving progress over its ACH Network through the expansion of Same Day ACH. Along with The Clearing House and the Federal Reserve, Nacha announced that the ACH Network can now support Same Day ACH transactions initiated with an FI until 4:45 p.m. Eastern time. Funds will be settled into a beneficiary’s account at 6 p.m. Eastern time at the latest. Nacha noted that these expanded operating hours allow the ACH Network to settle Same Day ACH transactions four times each business day.

“The expansion of Same Day ACH is a textbook example of collaboration among the organizations that make up the ACH network,” said Nach President and CEO Jane Larimer in a statement.