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Supporting the evolution of faster payments

By Charles Harkness, SVP, Strategic Operations Officer

As mentioned in last month’s note from our CEO, the Federal Reserve Bank announced plans to develop a new round-the-clock, real-time payment and settlement service, called FedNow℠, to support faster payments in the U.S. At Corporate One, we believe the Federal Reserve’s decision is an important milestone in the evolution of payments in the U.S. and a strong endorsement of faster payments, which places even greater emphasis on the need for a robust credit union solution. This article highlights just a few of the ways Corporate One has been supporting the evolution of faster payments in our industry.

Supporting ongoing payments initiatives

Starting with the formation of the Faster Payments Task Force in 2015, the Federal Reserve has provided leadership and a forum for U.S. payments improvements industry collaboration. Corporate One has actively participated in these ongoing payments initiatives, including supporting the U.S. Faster Payments Council (FPC), evolving from the work of the former Task Force and Governance Framework Formation Team. As a founding sponsor and active member of the FPC, Corporate One is helping to ensure the needs of credit unions and credit union members are clearly articulated during strategic workgroups, committees and planning sessions. I also have the privilege of being the current chair of the FPC’s Education and Awareness Workgroup.

Understanding the evolving liquidity environment

As an aggregator of payments for credit unions, our faster payments team has been working diligently to gain an understanding of the potential impact of faster payments with an emphasis on the expanded hours (24/7/365), changes in the opening and closing of Fedwire, and liquidity management. These are critical factors for consideration as we work to build a Corporate One faster payments hub with connectivity to existing and future faster payments solutions, including the FedNow Service.

As the payments ecosystem evolves to include real-time payments and immediate settlement, liquidity is an important factor for credit unions to examine. Participating in a real-time payments system increases intraday liquidity needs, as adequate cash must be held to fund outbound payments. The accounts used to fund such systems are typically held at Federal Reserve Banks or correspondent institutions, such as Corporate One, and funds can be transferred only during normal operating hours. This produces an inherent challenge in which participants need to balance the risk of underfunding payment accounts and the inefficiency produced from overfunding accounts.

Facilitating settlement and liquidity management

As a funding agent for both TCH’s RTP Network and (the future) FedNow service, Corporate One will fund and manage positions in both network accounts on behalf of our member credit unions. What this means for our members is that we will be able to facilitate the settlement and 24/7/365 liquidity management of members’ RTP network participation, which could be overly burdensome for credit unions to administer on their own.

Clearly, the adoption of faster payments is an opportunity for credit unions. Money movement services have become more commonplace as consumer and small businesses send, receive, and even store cash through retail and technology-operated platforms. The rapid evolution of technology presents a pivotal opportunity for the payments industry to modernize the nation's payment system and establish a safe and efficient foundation for the future. Corporate One remains poised to help credit unions succeed in the faster payments arena and to ensure our members stay relevant and competitive as the industry continues to evolve.