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U.S. Faster Payments Council releases faster payment interoperability white paper

Reed Luhtanen, FPC Executive Director

The U.S. Faster Payments Council (FPC), a membership organisation devoted to advancing faster payments in the United States has released a new Faster Payments Interoperability white paper developed by the FPC Network Committee.

The white paper explores different models that can connect systems to achieve payments interoperability such as point of origination, network to network, or an intermediary as party to the payment, and how settlement could work in those models. The form of settlement is an essential factor when considering options for interoperability between faster payment systems.

The idea is to enable individuals to make payments to anyone else in a seamless, secure and straightforward way that meets the demands of today’s customers. Interoperability may help the U.S. extend faster payment functionality to consumers and businesses across the country and further the goal of spreading the benefits of faster payments broadly.

“Our Network Committee includes experts from U.S. network operators who are well positioned to deliver objective information to all industry stakeholders about faster payments interoperability. We’re pleased to present this paper as a first, important step as we build a common understanding of payments interoperability. I’d also like to thank each committee member for all the hard work and thought they have contributed to this collaborative effort,” said FPC Network Committee Chair Steve Ledford.

Interoperability in a faster payment system can help achieve seamless processing in both sending and receiving of payment instructions across various payment solutions. This can significantly benefit all players in the ecosystem if it provides access and reach to any end-user, regardless of the network their financial institution connects to.

In addition to illustrating three models for payments interoperability, the paper provides an explanation of settlement. The white paper defines the overall settlement process in terms of two factors: timing and netting. Based on these two factors, the settlement process is defined as one of the following: deferred gross settlement, deferred bilateral net settlement, deferred multilateral net settlement, and real-time gross settlement (RTGS).

“This white paper sets a solid foundation for talking about real-world interoperability approaches within the FPC. While we recognise the road to interoperability might not be easy, with the support of our members and the industry at large, we are up to the challenge. Across the ecosystem, FPC members are collectively dedicated to a future of faster payments and this paper is just one example of how our members are developing tools, guidance, and other resources to help the industry collaborate and engage in additional dialogue,” said FPC Executive Director Reed Luhtanen.

FPC also reinforces on the importance of industry collaboration in tackling complex topics such as interoperability among faster payments solutions, identifying real-world solutions that can ease the adoption of faster payments, managing security risks and fraud threats, addressing barriers to cross border payments, and more.

The council by providing a thorough description of the models for payments interoperability, outlining the distinct settlement options, and describing how overlay services affect interoperability expects to have industry-wide conversation on the various approaches the U.S. market could take to achieve ubiquity. Recently, Volante Technologies joined U.S. Faster Payments Council.

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