The Snail’s Pace of Payment System Reform
I love it when people send me emails or comments on my blog because there are many times as I sit here and comment on the news that I feel as if I am living in a parallel universe.
Case in point is the announcement that the Federal Reserve Past Payments Task Force has agreed on the criteria that will be used to “assess faster payments solutions.” It is the Fed’s hope that the 36 effectiveness criteria identified by the 320 member task force will act as a guide for innovation in the payments industry. The criteria are grouped into six broad categories addressing the ubiquity, efficiency, safety and security, speed, legal and governance of a faster payments system. Each one of these criteria comes complete with a further explanation of individual criteria.
Can someone say paralysis by analysis? Don’t get me wrong. I have been pointing out for a while that the laws and regulations surrounding the payment system are woefully outdated and growing more so by the day. But, this is an issue that requires swift and decisive leadership. In contrast the Federal Reserve is acting as if it can methodically develop a payment system that will be adopted by the industry as a whole.
In fact, the modern payment system is evolving organically and regulators can only hope to influence its development if they stop pretending like they have years to come up with perfect solutions. For example, our existing regulations don’t address viability for peer to peer lending. They were developed in an age before Smart phones made it possible for consumers to remotely deposit checks and technology companies engrafted themselves onto payment systems.
In short, there is plenty of practical work to be done and done quickly. In a best case scenario, the material being developed by the Fed will help standardize the adoption of technology by giving developers a sense of what their payment solutions are going to be expected to achieve. But even this seems like a pipe dream to me. In an age when major banks are already investing billions of dollars into developing their own block chain technology even this seems like a fanciful dream.