Federal Reserve's FedNow Service will offer faster payments solutions

posted by Paul Waltz on Wednesday, November 13, 2019 in SHAZAM Blog

SHAZAM is owned by 540 community financial institutions and provides processing services to more than 1,000 community financial institutions across the country. Our overarching desire is to ensure nondiscriminatory access to an open, standards-based U.S. payments system. The Federal Reserve plays an important role in developing a faster payments system and we support it becoming an operator. We also consider the following criteria important to the successful implementation of a real-time gross settlement service.

Interoperability is critical

Allowing systems to exchange data is the only viable way to assure open access to faster payments systems by all players. Without such access, small to midsized banks and credit unions will be denied participation in the payment system and forced to use the proprietary systems of their larger competitors. This will put small to midsized financial institutions at a disadvantage and restrict their ability to compete.

Governance model

The Fed has done an exemplary job facilitating the Faster Payments Task Force and Secure Payments Task Force. Yet, the lack of uniform standards and rules has led to a fragmented U.S. payments system. We believe a structure like the Automated Clearing House is a model to follow.

We encourage the Fed to work closely with the U.S. Faster Payments Council, International Standards Organization and the American National Standards Institute. This will ensure the proper development and enforcement of uniform technical and operating standards. By developing an inclusive authority, all financial institutions and their accountholders will benefit from a competitive market.

Directory service

Implementing a faster payments system that serves anyone at any time requires a common directory tool to store nonpersonally identifiable information. In this way, accountholder funds can be easily be moved from one institution to another. The directory service should allow payers to use an email address or phone number as an alias to send funds. And, because consumers often have accounts at multiple institutions using the same alias shouldn’t be restricted.

Currently, sensitive account credentials are shared and transmitted among several parties causing needless risks. This situation can be resolved by creating a uniform directory service that’s used by all financial institutions. Establishing a directory will ease the enrollment process, make day-to-day transacting simpler for users, and reduce the need for sharing sensitive account credentials within the faster payments system.

Next steps

It’s an exciting time in the payments system evolution. We support the Fed’s leadership in providing interoperable and fair access for community financial institutions.

As I’ve shared before, SHAZAM has been deeply involved in this effort from the beginning and we continue to represent the interests of community financial institutions across the country. A united voice from all of us invested in community banking is vitally important to this issue.

By working with industry leaders and accredited standards bodies, the Fed can create an interoperable and ubiquitous system, bringing the U.S. to the forefront in delivering faster payments.


  1. advocacy
  2. faster payments
  3. federal reserve

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