The need for payment speed
The financial industry’s push for a faster more efficient payment system in this country is finally gaining some traction. The question is: are the changes coming fast enough to satisfy consumer demand now that Apple has inserted itself into the payments system?
Yesterday the Federal Reserve issued a report on updating the payments system. It concludes that:
“the U.S. payment system is at a critical juncture in its evolution. Technology is rapidly changing many elements that support the payment process. High-speed data networks are becoming ubiquitous, computing devices are becoming more sophisticated and mobile, and information is increasingly processed in real-time. These capabilities are changing the nature of commerce and end-user expectations for payment services. Meanwhile, payment security and the protection of sensitive data, which are foundational to public confidence in any payment system, are challenged by dynamic, persistent and rapidly escalating threats. Finally, an increasing number of U.S. citizens and businesses routinely transfer value across borders and demand better payment options to swiftly and efficiently do so.”
The Fed’s next step is to use the report as a framework for further discussion within the financial industry about what steps can be taken to quickly implement needed changes. If all this sounds a bit too slow it’s because events are quickly outpacing the Fed’s ambitions.
Currently NACHA, which implements the ACH electronic payment system, is seeking comment on a proposal to implement Same Day Settlement for ACH transactions. Although the CFPB has already sounded the consumer alarm, NACHA’s proposal is, in part, a recognition that banks could lose control of the payments system if they don’t start innovating at the speed of Apple.
For example, a day after the Fed’s report we may get our First glimpse of how well Apple is doing getting people to use IPhones to make point-of- sale transactions. Apple may very well be on the verge of doing to banking what it did to the music industry: Making the system used to deliver financial goods and services more important to consumers than the actual service provider-i.e. a stodgy bank or credit union. People are going to expect quicker more efficient payment systems and migrate to those financial institutions that are ready to provide them. Here are some links for additional information.
Are we ready for a Grexit?
In his State Of the Union address President Obama correctly proclaimed the U.S. economy is the strongest in the world. The problem is that says more about the weakness of the world economy than it does about the strength of ours.
Those of you looking for signs that the economy isn’t out of the woods yet need look no further than Greece. The first piece of a worst case scenario has fallen into place with the election of the left-wing Syriza party in a decisive victory on Sunday. Greece’s economy is way too small to impact the world but the party has a clear mandate to renegotiate the austerity measures it has been labouring under in return for financial aid from the European union.
The election sets up a game of chicken in which Greece could implicitly threaten to walk away from the EuroZone and the Euro currency if the austerity measures aren’t scaled back and Germany threatens to call Greece’s bluff. If this does happen no one knows what impact this would have on the Euro or the world economy and no one wants to find out. In the meantime expect even more downward pressure on bond yields.
This article link offers an interesting perspective on what lays ahead