The Biggest News this Week

October 23, 2014 at 8:59 am Leave a comment

Although the finalization of QRM regulations on Tuesday garnered all of the media attention the week’s news that will have the biggest impact on your credit union is yesterday’s announcement by the Clearing House that it is committed to “a multi-year effort to build a real-time payment system to better meet consumers’ and businesses’ expectations in an increasingly digital economy.” The Clearing House is an association composed of the world’s largest banks; they own the world and process a good chunk of its payments. Considering the size and reach of these banks, whatever platform they develop will become the standard for all financial institutions.

Just how big a deal is this? For one thing their commitment to modernization is Spot-on. the payments system is woefully out of date. Its legal framework is derived from a time when there were no computers let alone smartphones. As a result the financial industry is still quibbling over midnight deadlines and signature recognition while Wall Street completes trades between anonymous counterparties in nano-seconds and college kids transfer funds between each other with the touch of a smart phone. The system is woefully antiquated  and out of touch with consumer expectations.

The announcement also shows just how quickly banking is getting away from banks and by extension credit unions. According to this morning’s press reports (see the links at the bottom of the blog) just two years ago the Clearinghouse was instrumental in killing a proposal to develop a real-time payments system. In the last two years Apple, GoBank and Wal-Mart just to name a few have shown just how easy it is to empower the consumer to expect seamless real-time financial transactions. The same consumer that can waive a smart phone to buy lunch isn’t going to tolerate a system where money is “provisionally credited” to his or her account. And don’t overlook the bitcoin. It’s demonized as if it’s a technological Ebola virus but it demonstrates that it is possible to exchange a currency without the use of a bank or credit union.

Where does all this leave credit unions? I honestly don’t know but I wish the industry was giving more thought to what it expects out of the payment system of the future. A changing payments system will mean technology upgrades, new legal obligations and regulations. Credit unions are stakeholders in the system and its time for credit unions of all shapes and sizes to jointly develop industry specific principals for what a new payments system will look like. Now is the time to think and think quickly.

 https://www.theclearinghouse.org/press-room/in-the-news/2014/10/20141022-tch-to-develop-real-http://www.americanbanker.com/issues/179_204/the-clearing-house-to-build-real-time-payments-system-1070764-1.htmltime-payments-system

http://www.finextra.com/news/fullstory.aspx?newsitemid=26617

Entry filed under: Advocacy, Regulatory, technology.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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