From the September Special Report issue of Treasury & Risk magazine

The Next Evolution of the US Payments System

Cooperation Key to Future of Payments

The U.S. payments system is facing a defining moment. New technologies and industry participants are changing users’ perceptions of payments while regulatory initiatives designed to improve safety and to address expectations around speed and convenience have been introduced. Evolution is essential but the absence of appropriate dialog—between merchants, banks, payment processors and technology providers—in the development of new payments models means that meaningful advances in U.S. payments have been limited.

Incongruous efforts to improve payments have mostly thus far produced only niche benefits or, worse, caused new problems. If the U.S. is to create the payment system it needs for the 21st century, a new approach based on a simultaneous dialogue involving all parties is critical. To produce a smart system that meets the needs of all, stakeholders must accept that the challenges of the U.S. payment system cannot be solved by disparate efforts driven by the interests of any one group: a broader perspective is needed if true innovation is to prosper.

Losing Sight of Users’ Needs

The goal of regulators in introducing new payment rules is usually to improve the quality and security of service to users. However, some regulatory initiatives have failed to deliver results for users.

For example, in recent years a new message format was introduced with the objective of supporting extended-character business remittance information, prompting a shift from paper to electronic and improving the ability of companies to reconcile receivables. Unfortunately, it has suffered from limited uptake and offered minimal opportunities for banks to monetize their significant investments.

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