Wednesday, June 12, 2024
"Our latest survey reveals promising progress in the adoption of faster payments across a diverse range of financial institutions, including banks, credit unions and payment providers," stated Anthony Serio, chief risk officer at Sphere Labs, and chair of the FPC's Financial Inclusion Work Group.
The work group just published Faster Payments and Financial Inclusion, a report detailing a comprehensive survey conducted during the third quarter of 2023. It explores the readiness and preparations made by financial institutions to implement faster payment solutions and the impact on financial inclusion.
"The survey highlighted concerns related to fee variability, cross-border payment capabilities, and the essential need for stronger consumer protections and trust-building measures," Serio noted. "Our mission moving forward is clear: to ensure that faster payments evolve not just in terms of speed and efficiency, but also become truly inclusive, addressing the needs of all Americans comprehensively."
The survey revealed that while a majority of financial institutions are actively engaged in faster payments initiatives, pain points remain. For example, only 56 percent of FIs participating in the survey offer faster payments. An additional 35 percent are planning to do so, however.
Also, 45 percent of FIs surveyed charge fees for faster payments—to senders, recipients or both parties. Of potential concern from a fraud perspective, a majority of FIs (about 9 out of 10) do not confirm with customers their intent to send a payment.
"While financial institutions are beginning to engage with faster payments, their efforts to ensure financial inclusion are in the early stages and much work needs to be done," said David True, partner at PayGility Advisors and a member of the FPC work group.
The report further underscores that FIs need to address several key areas to enhance financial inclusion. These include the need for better education and awareness about faster payments options, improvements in user experience to ensure accessibility for all demographics, and enhanced collaboration.
Not mentioned in the report, but of concern to policymakers, are the opportunities for fraud and scams created by faster payments.
At a recent Senate hearing Senator Richard Blumenthal, D-Conn., related how customers of three of the largest banks in the country—JPMorgan Chase, Bank of America and Well Fargo—had $456 million siphoned from their bank accounts in 2022 due to fraud and scams on just one faster payment network, Zelle.
That didn't sit well with Sen. Blumenthal, who chairs the permanent subcommittee on investigations. "The banks in America have a dirty little secret. It's called Zelle," he declared during a recent hearing before the subcommittee.
Sen. Blumenthal added that scammers aren't just using Zelle to defraud people. "What distinguishes Zelle is speed, permanence and bank ownership, and that's the reason why we're focusing on Zelle," he said.
He pointed to the fact that Chase, BofA and Wells Fargo handled the majority of Zelle transactions: 73 percent, last year, which could account for the fact that they had racked up so much in fraud losses.
"All peer-to-peer payment apps are susceptible to fraud, no question about that fact," Sen. Blumenthal said. "And I want to be clear that fraud happens on all of them, but Zelle deserves particular attention because of its direct connection to trusted financial institutions."
Zelle is operated by Early Warning Services, which is owned by seven of the nation's largest banks. Blumenthal believes it is up to these banks to rein in fraud on Zelle. "You have the expertise, the resources and the obligation to make sure you do better," he said. 
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