Christine M Cumming: Enhancing payment system speed, efficiency and security Keynote remarks by Ms Christine M Cumming, First Vice President of the Federal Reserve Bank of New York, at the TCH Annual Payments Symposium and Business Meeting, New York City, 5 July 2013. *  *  *  It is a great pleasure to be here today to speak to you about the evolution of the U.S. payments system and the Federal Reserve Banks’ role in that evolution. The views I express will be mine and not those of the Federal Reserve System or the Federal Reserve Bank of New York, although I will draw on the considerable work being done in the Federal Reserve on the future payments direction. Without question, we are living in an once-in-a-lifetime period of change in the U.S. payments system. Payments providers are seeking ways to bring mobile technology to payments, an integration widely seen as a game-changer by payments industry participants. Person-to-person payments mechanisms have grown rapidly, and the potential for those funds to be immediately credited to the receiver could be another game-changer. Commerce increasingly integrates with a payments mechanism, especially as information about spending patterns are a source of value to firms and loyalty discounts and points become an important part of the business value proposition to customers. Indeed, rather than talk about a payments industry, we find ourselves talking about a payments ecosystem, a web of banks, service companies, alternative payments providers and commercial firms. Some have called these developments a second internet revolution.

If the loops don’t communicate, we fall short of the network opportunities that checks, debit and credit cards, and ATM cards offer. The tremendous potential in mobile lies in the eventual speed and quality of the end-to-end experience and in the security of any information on the device or in transit, tough challenges simultaneously to engineer. And beyond mobile payments, achieving the speed and general availability of faster payments seen or planned for in the United Kingdom, Australia and other countries requires tremendous coordination across the payments industry. So, how does the Federal Reserve fit into this period of extraordinary change and challenge? BIS central bankers’ speeches  1  The Federal Reserve has long championed access, including nationwide connection, coordination, as well as the security, efficiency and resiliency of the nation’s principal payments mechanisms. In light of the tremendous increase in payments innovation, last fall the Federal Reserve Banks launched a new strategic plan for Federal Reserve Financial Services. We’re asking how our services may need to change to facilitate the direction of the payments market and how we could enable existing and future innovation by the payments industry. The Federal Reserve Banks are actively engaged in adjusting our planning, our product development and our resources to address innovation in the marketplace. To do that, however, we need to build consensus within the industry around a broad direction, around the benefits of access and connectivity across the nation, and about understanding and managing the risks of new technologies and new business models that emerge.