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Risks in Faster Payments

Julius Weyman
Retail Payments Risk Forum Working Paper
Federal Reserve Bank of Atlanta
May 2016
Abstract: The purveyors of payment systems have long had the means to reduce
intermediation time for retail payments. Japan’s Zengin moved first—as far back as
1973—but for years, little else followed. That has all changed. Now, payment
system purveyors that have established the means to effect retail payments in
seconds talk of it as a marquee achievement. Those that haven’t yet launched such
a system are generally in pursuit of it, with few failing to name it as a primary goal.
As more countries implement faster payment schemes, the question of what the
United States will do gets increasingly pressing. This paper uses a variety of
sources to determine how conditions in the United States compare to those of 15
other countries that have either deployed a faster scheme or have made plans to do
so. It then draws out various risks that attach to the initiative and contrasts
domestic circumstances with the parallel circumstances in other countries. The
paper also provides a practical approach to understanding the highlighted risks,
describing implications and suggesting options for addressing the challenges.

The views expressed here are the author’s and not necessarily those of the Federal Reserve Bank of
Atlanta or the Federal Reserve System. This working paper is not associated with the work of the
Faster Payments Task Force. Any remaining errors are the author’s responsibility.

I.

Introduction

Payments may never have enjoyed more attention than now. From virtual money to
biometrics, chips, and mobile payments, there is no shortage of payment news.
The speed at which one can pay or be paid is on the list of hot payment topics. While
the United States has moved toward making payments within a day, many
countries have stood up “real-time”1 payment schemes, or will launch them soon.
As for what’s being said about real-time schemes, it would be infeasible to count all
the articles, white papers, pamphlets, and blogs that have been written on the
subject. Discussion ranges from whether, why, or how to implement the speedier
payment schemes all the way to recounting progress of those that have already
moved forward.
Despite all that has been written and said, the risks associated with faster
payments—from establishing to maintaining them—have not received much ink.
This paper explores some of these risks, considering them against a backdrop of
what is known about existing or contemplated models. The objective is to offer a
baseline understanding of the risks so that all involved can better evaluate and
manage them as the work to advance a faster payment scheme in this country
moves forward.
The paper is organized into sections that break down the most notable risk
categories. Section II focuses on the traditional, or core, risks in payments:
settlement, operations, and security. Section III considers other risks, risks that are
unique to the United States.

1

For purposes of this paper, real-time or “faster” payments are defined as retail, interbank, demand-deposit account (DDA) payments that are
confirmed as successfully sent and received (from payers and payees, respectively), with funds available for use by the payee in minutes or
seconds. Interbank settlement may not coincide with messaging or funds availability to the payee.

2

II. Core Payment System Risks
Settlement
Overview
Intermediated payments essentially have two parts. The first is messaging—the
instruction that delineates who is to be paid, by whom and in what amount. The
other part is settlement, which is the event that finishes a payment. It is the actual
transfer of funds, the account entries directed by the messaging components that
record and reflect the transfer of ownership of value from payer to payee.
Settlement is commonly the slowest aspect of any payment scheme. Excluding realtime gross settlement (RTGS) systems,2 most payment schemes offer settlement
across windows of one to three days.3 While messaging may occur in real time (or
near real time) and give users a feeling of virtually instantaneous payment, the
settlement—actual adjustments to the accounts of payers and payees—occurs later.
Cash transactions and some isolated exceptions notwithstanding, except where
retail, faster-payment schemes have been deployed, retail transactions do not
typically enjoy same-day settlement, much less immediate or near-real-time
settlement.
By definition, any delay in settlement introduces some degree of risk, as goods,
services, or money has been afforded one party prior to payment becoming final.
The other party has only the “promise” of payment. As a consequence, until
settlement is complete, at least one of the counterparties involved in any retail

2

In general, with RTGS systems, messaging and settlement occur simultaneously, message by message. The
systems are typically operated by central banks that facilitate final, irrevocable settlement in central bank funds.
Commonly referred to in the United States as “wholesale payments,” RTGS systems predominantly exist to
facilitate the movement of select, high-value transactions that require immediate clearing and settlement. They
are not generally suitable for retail payments, primarily because of the transaction costs and processing limitations
inherent in most current RTGS systems.
3
Depending on the retail payment instrument used and the timing of a transaction—for example, a check
exchanged on the Friday of a three-day weekend—settlement between payer and payee accounts could extend
longer.

3

transaction is exposed to risks. These include monetary loss owing to theft or fraud,
liquidity risk,4 credit risk, or even Herstatt risk.5
Differences in Settlement Approaches for Faster Payment Schemes
Even without an in-depth understanding of payments and settlement, it is easy to
determine that the aforementioned risks—to the extent that delays in the
settlement cycle create or exacerbate them—are reduced as that cycle shrinks.
From three days to one day to same day, all other things being equal, the noted
risks decrease as the time intervals for settlement decrease.
In terms of faster payment schemes that have already been deployed, there are two
primary ways of attending to settlement. It can occur coincident with (or very close
to) the messaging, or it can occur at some point later.
Table 1 provides a summary of account posting and settlement timeframes for some
of the systems that have been deployed around the globe.6, 7 All of the systems
facilitate messaging within moments, and the overwhelming majority of them
assure that account posting occurs in less than 60 seconds. However, settlement
ranges from immediate, or “real time,” to the next day.

4

Liquidity risk in this context is intended as a funding or cash flow issue—that is, the strain that may result from
needing to replace goods before payment has been received to fund the resupply or just to support the enterprise.
Funding liquidity is most commonly an issue for small businesses at almost any time and can become particularly
acute during financial downturns or crises. In the case of crises, the footprint of businesses affected by slowed or
strained cash flow may expand to include virtually any business interest.
5
Herstatt risk is similar to domestic interbank credit risk—the risk that arises when a counterparty pays out funds
before itself receiving payment—but indicates the circumstance in an international or cross-currency scenario.
6
Mazursky notes real-time payments as a reality in more than a dozen countries, while Lodge indicates the
existence of more than 35 faster payments systems around the world.
7
Clear2Pay has described 15 faster payment systems, detailing their account posting and settlement speeds. Its
2014 report guided the selection of the countries considered in this paper (Clear2Pay 2014).

4

Table 1: Various account posting and settlement schemes
Country
Brazil

Account posting
< 1 minute

Settlement speed
Continuous net settlement (every 5
minutes)

China

< 20 seconds

Deferred net8 (various scheduled)

Chile

< 10 seconds

Deferred net, 3X daily

Denmark

Immediate/Real-time

Deferred net, 6X daily

India

Immediate/Real-time

Deferred net, 3X daily

Japan

Immediate/Real-time

End of day–net

South Korea

Immediate/Real-time

Next day (deferred net – 11:30 a.m.)

Mexico9

< 1 minute

Within seconds; priority queuing

Poland

Within seconds

Immediate/Real-time

Singapore

Within seconds

Deferred net, 2X daily

South Africa

< 1 minute

Deferred net, hourly

Sweden

Within 15 seconds

Deferred net, multiple/day

Switzerland

Immediate/Real-time

Within seconds; priority queuing

United Kingdom

Within two hours

Deferred net, 3X daily

Message confirmation <15 seconds

Australia10

Immediate/Real-time

Immediate/Real-time

Sources: Guo, Kauffman, et al. (2015); Clear2pay (2014, 15–43); BIS 2014; analysis of central bank website information

Considerations Associated with Varying Settlement Approaches
As table 1 illustrates, real-time or near-real-time payments do not necessarily mean
real-time or near-real-time settlement. Arguably, any delay in settlement implies
increased risk.11 If this is taken as a given, with all other things being equal, the
ideal faster payment scheme would have settlement coincident with messaging.

8

Deferred net settlement is transaction settlement on a net basis at the end of a predefined cycle or time period.
At the Faster Payments Imperative Conference in October 2015, the Banco de Mexico noted that in a 2013
sample, average end-to-end processing time was 13.7 seconds. (PYMNTS.com and NACHA sponsored the
conference.)
10
Australia is scheduled to implement an immediate-clearing, immediate-settlement system in 2017.
11
Conversely, speed in settlement can mean less time to scrutinize or determine transaction risk and can give
occasion for fraud. Consideration of this general circumstance is covered later in the paper, in the subsection
entitled “Faster Payments and the Impact on Fraud.”
9

5

The practical reality is that all things aren’t equal. In response to a Take On
Payments blog post earlier this year, reader Tom Hay put some of the issues in this
context:
As someone who was heavily involved with the design of settlement for UK
Faster Payments I can confirm that several options were considered before
choosing the Deferred Net Settlement model, with exposure limits enforced
per bank. Real-time settlement imposes a huge load on RTGS systems which
were designed to handle low volumes of high value transactions, not high
volumes of low value. It also adds significant complexity to ensuring integrity
across the sending and receiving bank systems, the message switch and the
RTGS system, as well as adding a delay to message processing and
introducing a potential single point of failure. Banking is about determining
acceptable risk levels, not completely eliminating risks. Risk experts must
work closely with their technical colleagues to create a system design that
balances settlement risk management with system performance, integrity
and cost (Hay 2015).
Choosing an approach that delays settlement and nets transactions should result in
a smaller number of transactions to settle, thus reducing settlement costs. In turn,
this also may keep ongoing operating and use costs low. From the perspective of
standing up a system quickly and also minimizing construction costs, a netting
system may be preferable to building a real-time settlement engine. Finally, a oneby-one transfer/settlement scheme may fundamentally complicate or overload a
network—particularly if the faster payment service facilitates a high volume of lowvalue transactions. Taken together, there are many reasons for the various
approaches to settlement across the models that have been presented (Greene,
Rysman, Schuh, and Shy 2015).
Yet it seems worthwhile to point out that a modification in the speed of retail
payment messaging without a parallel modification in the accompanying or
supporting settlement system could be suboptimal. One-third of the schemes
studied for this paper chose to harmonize settlement and messaging for their faster

6

schemes.12 In its contemplation of this issue, the Reserve Bank of Australia
explained its thinking and conclusions.
The Board believes that an adequate solution for real-time payments will
require a new system, based on real-time clearing of payment instructions.
To complement this, the Reserve Bank is prepared to contemplate
establishing a system for real-time settlement of retail transactions….
Real-time payments require at a minimum real-time clearing, the capability
for real-time posting…and the ability for participants to provide credit. The
latter constraint can be removed if real-time settlement is available.… This
implies a reduction in settlement risk for participants compared with a
deferred-settlement system. A second benefit of the removal of the need to
provide credit would be to facilitate participation by entities that would not
be in a position to provide credit (RBA 2012, 15–16).
It is evident that the delay in settlement creates tradeoffs between the cost of realtime settlement and credit risk as well as other issues that need to be considered
(Greene, Rysman, Schuh, and Shy 2015, 10). In the final analysis, the choice to not
build an immediate settlement engine as a function of rolling out a real-time retail
payment system may be practical, especially when we consider mitigating measures
against the risks inherent in a deferred- or delayed-settlement scheme.
Straightforward measures such as transaction dollar caps, aggregate dollar
thresholds, or prefunding exist to reduce related risks. Some or all of these as well
as other risk-mitigating measures have been employed in every faster scheme
where settlement is not immediate.

12

While Brazil’s settlement model is technically not immediate, it represents a hybrid approach where settlement
is frequent and ongoing. Consequently, its settlement model was judged as essentially corresponding with
messaging. Similarly, Sweden’s settlement model was described as immediate in some sources but not all.

7

Operational Risk
Overview
“Operations” may be defined as the people, processes, and systems required to
perform a task, the practical things that lead to the production of a good or service.
The success or failure of an enterprise can often be traced back to the relative
effectiveness of operations.
For the purpose herein, “operational risk” relates to the potential failure of people,
processes, or systems—excluding cybersecurity, which is covered separately.13
Real-Time Schemes and Their Effect on Operational Risk
Faster payment schemes are unlikely to eliminate much of what may be considered
customary, operational risk. At the same time, they may introduce new risks. The
new systems and processes will have to coexist and integrate with legacy payment
complexes that are largely batch environments. Often, these environments do not
seamlessly knit together or “talk” with one another. Imran Ali, payments manager
for Europe, Middle-East, and Africa (EMEA) at Citigroup, highlights some of the
applicable issues this way:
There are…challenges for banks, foremost among them being the overlaying
of single real-time payments on to an existing batch processing
infrastructure…. Processing single payments [affects] the infrastructure,
from channel to payment processor, including general ledger, sanctions and
anti-money laundering (AML) systems, reporting databases, customer
accounts payable/receivable…and reconciliation (Ali 2013).
Ali’s list captures the essential operational challenges. However, financial
institutions have repeatedly demonstrated competence and general success when it
comes to grappling with these core matters— from the first check systems that were
overlaid against cash processing to card, ACH, and wire—with due consideration to
13

Numerous sources define operational risk this way, but they typically include cybersecurity.

8

the other evolutionary if not revolutionary changes legacy payment schemes have
undergone over time. Some of the changes have been nontrivial and include the
introduction of automated teller machines (ATMs) and high-speed check processing
(extending through to image capture and remote deposit capture for checks) to
established payment schemes. Financial institutions have also modified legacy
systems to accommodate the introduction and stabilization of online as well as
mobile banking platforms. Rather than attempt to break down and discuss each of
the risk elements that have repeatedly been experienced and conquered, it seems
prudent to focus on what may be considered unique in the context of faster
payments and as a consequence, arguably, the chief challenge looking ahead to
faster payments in the United States.
Mitigating a Unique Operational Risk with Real-Time payments
Ali also called out what appears to be different about a potentially new, faster
payment scheme as compared to the evolution of legacy payment schemes.
24x7 coverage [will be] required outside of traditional payment operating
hours.... Being unavailable for a few minutes can cause several hundred
payments to fail and the consequences of any downtime becomes even more
serious.
Operating in a 24x7 environment also impacts how banks perform end-of-day
batch jobs. With real-time payments flowing uninterrupted banks can no
longer afford the luxury of having downtime to process end-of-day runs,
which have to be done while still processing payments from customers. This
requires banks to run two processing sites…live…enabling them to switch
from one site to another if downtime on one infrastructure is required (Ali
2013).
What seems to be consistently taken as a given, if not a necessity, is that any broadbased U.S. real-time (or near-real-time) scheme must necessarily be a 24/7/365
proposition. Part of that seems owing to the words themselves—“real time” or “near

9

real time” doesn’t say “except for payments that occur outside of business hours,” or
“excluding weekends.” Some have noted 24/7/365 availability as being “ideal”14 or as
parameters that ought to define “fast.”15
A 24-hour operation that doesn’t afford downtime, that will be required to operate
continuously while moving ever-increasing volumes, is largely unique in the context
of banking and legacy payments. Ceaseless operations of the nature being
considered are not only more demanding and less forgiving on their face, they are
arguably countercultural across a swath of payment franchises in the U.S. banking
world. In that way, this change could differ from the advances that have come
before. In spite of the many changes banking has experienced, it has not fully dealt
with this issue. The industry may have come to be overly reliant on the occurrence
of natural downtimes that still exist in many operations and that are used for
maintenance, repair, and cross-scheme assimilation. That prompts the question:
should planned downtime in a faster payment scheme be dismissed? In its study of
the potential for advancing a faster payment scheme, the Reserve Bank of Australia
reported that some commenters outlined a number of complexities that could result
from the extended operation of payments systems, including the effect on available
maintenance and housekeeping times for financial institutions. They acknowledged
the issue, adding they did not anticipate anything “insurmountable” in this regard
(RBA 2012, 9).
Given the number of faster payment schemes that function continuously, this seems
a fair conclusion. On the other hand, the overwhelming majority of these systems
are quite young and have not been tested—over time or as a heavily used platform.
Regardless, there is no arguing that planned downtime serves as a mitigating
action to the risk a continuous operation poses if it is a luxury that can be
permitted. Moreover, a faster system could also facilitate a faster bank run.

14

Clear2Pay’s “Flavours of fast” says “Ideally, a payment system would operate…24 hours a day, 7 days a week,
365 days a year” (2014, 13).
15
Greene, Rysman, Schuh, and Shy note: “Thus, the following four parameters may be included in the definition of
‘fast:’ 1. The ability to process (or at least originate and clear) transactions 24/7/365” (2015, 8).

10

Planned downtime, or the notion that downtime occurs as a natural thing, might be
a useful tool in the context of slowing or halting the occurrence of a run.
Table 2 may suggest the hardship and expense associated with systems that
operate 24/7/365. It also may suggest a deliberate risk mitigation measure built into
some faster payment schemes. Interestingly, the table is split. About half of the
listed schemes offer a full 24-hour, 7-day window that has no apparent, noteworthy
exceptions. The other half indicate the use of built-in downtime, either fully across
the scheme, by bank, or, as in the case of the Swiss, with a distinct exception for
transactions occurring outside of “operating hours.”
Table 2: Operating windows from selected fast payment schemes
Country

Operating

Full 24/7 - Free from

hours

conditions/exceptions? (Y/N)

Japan

0830-1640

N

1973

Switzerland

24x7x365

N

1987

South Korea

24x7x365

1615 cutoff for “same day” transactions
Y

2001

Brazil

0730-1700

N

2002

Mexico16

22x7

Year established

N - Varies; 0600-1800 a required minimum

2004

N - Varies; full window, full service not offered by all FIs

2006

South Africa

24x7x365

Chile

24x7x365

Y

2008

United

24x7x365

Y

2008

Kingdom
China

24x7x365

India

24x7x365

N - Varies; full window not offered by all FIs.
Y
N - Varies; full window not offered by all FIs.

2010
2010

Poland

24x7x365

2012

Sweden

24x7x365

Y

2012

Denmark

24x7x365

Y

2014

Singapore

24x7x365

Y

2014

Sources: Guo, Kauffman, et al. (2015); BIS; Clear2Pay (2014.); various central bank websites

16

At the Payments Imperative Conference (October 2015), Mexico indicated banks will be required to gradually extend hours
for all low-value payments to reach 24x7.

11

As a general rule, faster payment systems have gradually moved forward—to
continuous operating windows, less-restrictive dollar thresholds, or less restricted
access—eventually evolving to the current models, with less restrictive operating
parameters in place. However, as table 2 shows, a number of schemes retain
vestiges of restrictive elements as compared to others. Such an approach (ramping
down restrictions over time) may be prudent in the United States, particularly
given the conditions here. None of the extant systems have had to contend with
anything comparable to what a U.S. system would face, either in terms of the range
of possible participating institutions17 or potential volume levels.
Concluding Thoughts on Operational Risk
Operational risk is complex. Almost everyone across any given financial institution
enterprise wrestles with it as a broad, ongoing issue. In speaking about operational
risk in February 2015, the assistant director for quantitative risk management at
the Federal Reserve’s Board of Governors, David Lynch, noted that “for some kinds
of risk—particularly those for which incidents are unpredictable or rare—the
agency lacks agreed-upon methods for counting and assigning costs to incidents.
Without those basic metrics, developing useful models for banks and supervisors to
rely on to identify and hedge those risks is very difficult” (Heltman 2015).
In that same presentation, Lynch noted the importance of data to making risk
decisions. While his topic was not focused on real-time payments, the basic thinking
is applicable. A lack of widespread, extended experience with all of the faster
schemes makes it impossible to draw firm conclusions about the likelihood of
failure(s) or the resultant impacts on a nation’s commerce or economy.
Consequently, it may be beneficial to reassess consumer demand, particularly for
full service across a 24-hour window or seven days a week, taking care to balance
presumptive or implied demand against the cost and the relative risk of serving

17

Refer to table 5.

12

such demand.18 While several sources report that the 2014 McKinsey study
commissioned by the Federal Reserve Banks found that 70 percent of consumers
preferred instant or one-hour payments—and were willing to pay for them—the
cost, and therefore the price that will be required to support a robust, ubiquitous,
24x7x365 service in the United States, remains unclear. Demand could fall short of
expectations if the prices necessary to support the ultimate service exceed current
thinking, among other reasons. High demand for faster payments, as judged by
volume levels wherein uptake supplants other payment choices or schemes, is not a
trend that has emerged in any scheme that has been launched. In arguably the
most successful scheme, the United Kingdom’s Faster Payments, consumers
generally pay nothing for the service. And while faster payments have grown
rapidly there, Faster Payment volumes have not appreciably eaten into other
payment options aside from an isolated ACH payment use case.19 Moreover, the
usage experience there may conform to the economic notion of a “free good” being
overused. If so, true demand may be distorted.
Surveys of consumer demand were not readily available in most of the countries
studied. However, Japan, which has one of the longest-running faster payment
services but has not yet introduced 24/7 services,20 showed outcomes well under the
Federal Reserve’s survey results. According to the 56th Opinion Survey of the
“General Public’s Views and Behavior,” conducted by the Bank of Japan (December
2013), about 60 percent of respondents were “likely” or “somewhat likely” to prefer
real-time bank transfers on weekends, holidays, and weekday nights. In a
breakdown of demand, the same survey showed that for such things as online
shopping purchases and business remittances, “demand” barely reached 20 percent,
and in some cases was less than 10 percent (RPSG 2014, 6–7). The demand for
18

The Federal Reserve Banks have already completed initial consumer research and published summary results on
end-user demand:
fedpaymentsimprovement.org/wp-content/uploads/enduser_demand_summary.pdf
19
The use case is standing orders or “standing” instructions an accountholder gives a bank to pay a set amount at
set times. This ACH use case in the United Kingdom has migrated almost completely from their Bankers’
Automated Clearing Services, or BACs, platform to Faster Payments.
20
Though Zengin, Japan’s fast retail payment scheme, is not currently a 24/7 option, Japan has announced plans to
supplement Zengin with a new platform that, together, will allow such. Japan’s aim is to have 24/7/365 retail
payment support available by 2018.

13

faster payments was highest for rent, insurance, and utility payments, and also for
payments to friends and relatives.
The extent to which any use case would drive ongoing, high demand in this country,
particularly in the absence of a good understanding of the cost and resultant prices,
is unknown. Properly discerning between presumptive versus real demand, with
due consideration for the most important operating window needs, could prevent
overbuilding, optimizing among system availability, risks, and costs. Since it isn’t
possible to identify and rank, with certainty, the risk/demand tradeoffs for a
continuously running system (versus one with planned downtime but that still
serves the overwhelming majority of needs), it may be prudent to start cautiously
and ramp up the offering over time. This ramping up would include everything from
operating hours to dollar thresholds, with steps being taken as experience is
accrued and as true consumer demands and needs become more clear. It would also
be in keeping with the path some have followed.
Security
Overview: Cyber Risk
The words “security” and “cyber risk” convey different meanings to any number of
prospective readers, making it useful to offer a contextual definition. In this context,
“security” is focused on those things related to the safety of information systems and
processes. “Cyber risk” means the risk of harm, disruption, or damage—everything
from outright financial loss to embarrassment—accorded to organizations from
some type of failure of their information technology systems.21
Security concerns are commonly categorized as operational risks, but any more the
discussion and reckoning of security seems too important to be lumped in with other
concerns. Expansive computing power is everywhere—in offices, in homes, and on
handheld phones. Moreover, this power is available to all. Payment systems are

21

This paper’s definition for cyber risk comes from the Institute of Risk Management: last accessed on December
25, 2015, theirm.org/knowledge-and-resources/thought-leadership/cyber-risk/.

14

inexorably linked to these same computing devices. Consequently, it is little wonder
a recent survey on risk trends yielded the following:
61% of risk managers believe the probability of a high-impact event in the
global financial system has increased during the past six months….
Cyber risk remained the number one concern globally.… Added one
respondent, “Cyber risks appear to be multiplying while controls to address
these risks may not be able to keep up with the continually escalating
threats” (DTCC 2015).
Additionally, while data are often cited as a key to combating fraud or at least
positioning to deal with it better, the necessary data elements can be hard to come
by, as the team working on the Federal Reserve strategy noted in its recent
exploratory paper.
Several barriers to the collection and sharing of payment security data were
observed during the course of this study. Observed barriers include the
proprietary nature of data; concerns about reputational risk, legal risk and
privacy implications; and the tradeoffs between cost and benefits of collecting
data that can help participants avoid fraudulent activity (FRB 2015, 33).
Faster Payments and the Impact on Fraud
Many have speculated that faster payments will mean faster fraud. Even though
several countries have rolled out faster payment schemes, it is difficult to get hard
data to identify the relative degree of fraud attributable to the new schemes. One of
the more comprehensive data sets showing fraud losses before and after the
implementation of a faster payment scheme is from Financial Fraud Action UK.
Their results are reproduced in the following chart.

15

UK Online Banking Fraud Losses 2004–14

UK Online Banking Fraud
Losses 2004-2014
70
52.5
46.7

50
40

35.4

33.5

30
20

60.4

59.7

60

23.2

39.6 40.9

£ in millions

22.6

12.2

10
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Note: The red bar indicates the year faster payments were implemented.
Source: FFA (2015, 23).

None of the faster payment schemes makes fraud data publicly available that are
specific to the faster scheme alone. Even if such were available, the relative
newness of faster payment schemes in most countries would make trends
questionable and conclusions premature.
That said, general observations about the trends available in the United Kingdom
show that at the launch of the United Kingdom’s faster payment scheme in 2008,
online banking fraud increased 132 percent from the previous year. The 2009 level
was 14 percent higher than that in 2008. Following a downward trend in 2010–11,
online fraud trends have steadily advanced, with the series showing its highest
level yet in 2014.
It is impossible to judge the extent to which the faster scheme itself is pivotal to any
trend. However, it seems reasonable to conclude that a new scheme will offer new
security challenges. It also seems prudent to keep things in perspective. One
observer summed things this way:
We can expect some increase [in fraud] to occur as online banking use
becomes more common, but the problem for banks is that online transactions
did not previously need to be completed so quickly— if you had days to check

16

for fraud then detection systems did not need to be so evolved…. [Yet] online
banking fraud is just a tiny fraction of the amount being sent through the
system daily (Bungey 2015).
Mitigation and Resolution: Is There a Singular, Imperative Control?
It is hard to find an approach to the range of security considerations associated with
a faster payment scheme that is more comprehensive than the “effectiveness
criteria” outlined by the Secure Payments Task Force.22 Not only does it identify a
comprehensive strategy for design and judgment, but it also represents a
collaborative effort. Collaboration is key since there is no single purveyor of
knowledge and information related to the matter. Successful coordination among
the range of stakeholders is critical to ensure that payments systems are as optimal
in function as possible and that they have the best chance of being effective in
guarding against fraud and misuse.
Yet it is unrealistic to think that the perfect system can be designed. Instead, it is
instructive to probe the various mitigation options to fraud and security concerns
that threaten any payment system and to identify imperative controls when
possible.
A review of systems already in place suggests that one of the more prudent
mitigating controls for a faster payment scheme may be a dollar threshold.
Corroborating evidence of this assertion is widespread. The Federal Financial
Institutions Examination Council has noted “monetary limits,”23 among other
things, as an important and appropriate control for protecting against error and
fraud. For its implementation of same-day ACH, the National Automated
Clearinghouse Association (NACHA) established a $25,000 dollar threshold per
22

The effectiveness criteria (draft) developed by the Secure Payments Task Force is available at
images.frbcommunications.org/Web/FederalReserveBankofChicago/%7B07a4d669-37af-4adf-b851577afa335707%7D_Faster_Payments_Task_Force_Draft_Criteria_Stakeholders.pdf. Security controls are detailed
on pp. 15–22.
23
As detailed in the Information Systems Audit and Control Association’s (ISACA) FFIEC’s Retail Payment Systems IT
Examination Handbook, last referenced on December 30, 2015, http://www.isaca.org/Groups/ProfessionalEnglish/it-audit-tools-and-techniques/GroupDocuments/retail.pdf.

17

transaction. In its “Faster FAQs” about the new same-day rule, NACHA explains
that the dollar threshold is because “faster velocity of payments is expected to
introduce risks that must be managed and mitigated. A per transaction dollar limit
is one way to mitigate risk.”24
The proper or perfect limit must be judged according to circumstance. Not
surprisingly, dollar thresholds are readily evident among the various faster
payment schemes in use around the world. However, although almost all publish a
threshold, thresholds range widely. Some operate with very high limits while others
have established much lower, restrictive limits. Table 3 presents several countries
and their threshold choices.
Table 3: Dollar limits of select fast payment schemes
Country

Dollar limit/Threshold
(approximate)25
$252,000

Brazil
Chile

10,000

China

7,700

Denmark

73,000

India

75

Japan

825,000
$100–300 retail (corporate

South Korea

threshold is $850,000)
Mexico

NA

Poland

25,000

Singapore
South Africa

7,000
$16,000 (after “business hours,”
holidays and weekends ($1,600))

Sweden

Varies among banks

Switzerland
United Kingdom

NA
$250,000; varies by bank

Sources: Clear2pay (2014, 15–43), central bank or service provider websites

24

Taken from NACHA’s Same Day ACH: FAQ page, last accessed December 30, 2015,
nacha.org/system/files/resources/Same-%20Day-ACH-FAQ-2015.pdf.
25
Thresholds presented in dollars are approximations based on currency exchange rates in late December 2015.

18

Highlighting some notable differences among the listed schemes, India’s established
limit of $75 is applicable for transactions without end-to-end encryption in use;
otherwise, banks may set their own thresholds. In other words, they’ve accepted two
approaches for deploying faster payments and established differing risk mitigation
strategies to make the service broadly accessible. In the case of South Korea’s
Hofinet system, varying threshold amounts exist. Corporate senders have a
threshold approaching $1 million; consumer retail transactions are far more
restrictive, falling in a range of between $100 and $300 per transaction.26
A review of the progression of the United Kingdom’s Faster Payments service (FPS)
to its current cap of $250,00027 is easily traced and seems useful.
At launch in May 2008, FPS had 10 member banks and began with a formal,
published cap of £10,000 ($15,000). The cap increased to £100,000 two years later
with the presumptive purpose of allowing the new scheme time to stabilize and for
overseers to observe uses, trends, and issues before risking large numbers of largevalue transactions.
The thresholds have continued to rise as confidence and experience with the new
system has progressed. Importantly, the scheme continues to enforce a threshold
and it also allows banks themselves to make individual choices about the limits.
Most institutions take advantage of this flexibility. It is common for institutions to
distinguish between personal and corporate transactions as well as for differing
payment types such as standing orders, single immediate payments, or future-dated
payments. There are also distinctions made among origination methods (in person,
phone, or online). The two tables in the appendix illustrate the range of
26

There are workarounds and exceptions. In an interview with the Wall Street Journal, Kim Dae-hoon, chief
executive of LG Group’s IT Unit, said LG’s Mpay service had received “certification for highest security clearance
from the financial regulator, meaning it can be used for transactions without limitations…[aside from] user’s creditcard limits…. Without such an approval, the…systems were required to limit purchase[s] to levels below 300,000
won (US$284). Anyone wishing to buy something that is more expensive usually has to go through the complicated
process of receiving online authentication before the purchase” (Lee 2014).
27
As of January, 2016, the current limit set within the UK faster payments service is £250,000 or about $370,000.
Banks may still set their own limits, and they vary widely among the different institutions. Few honor the
maximum allowable limit for any and all transactions and circumstances. For the most recent offerings, see the
Faster Payments website: fasterpayments.org.uk/consumers/how-much-can-i-send.

19

circumstances that have been considered illustrating an awareness of varying risks
depending on circumstance. They also suggest differing risk appetites and
judgments among participants vis-à-vis their customer base.
The cap rules that were established for FPS are explained below:
FPS has several features which are designed to mitigate…settlement risks.28
First, maximum transaction values have been set by the scheme at £10,000
for SIPs [single immediate payments] and FDPs [forward-dated payments]
and £100,000 for SOPs [standing order payments] with individual members
maintaining the authority to set lower limits. If a customer attempts to make
a payment that exceeds any of the respective limits, the payment is blocked
by the member. Second, Net Sender Caps (NSCs) apply to each member of
FPS. These are designed to limit the amount of settlement risk members can
bring to the system by limiting the maximum net debit position members can
accrue (BOE 2009).
Another perspective is offered by Bailey Reutzel in his American Banker piece,
“Lessons from the U.K.'s Colossal Payments Overhaul.”
When Faster Payments launched, the founding member banks proceeded
cautiously…. At the beginning, banks allowed payments up to five pounds
(about $8) to move over the rails. Banks then set their own values according
to their risk appetite. (Reutzel 2015).
The UK history indicates deliberate decisions pertaining to dollar thresholds. They
served as a means to make distinctions about the relative riskiness of different
users and channels, and they remain a tool to mitigate potential harm to the
scheme.

28

The thresholds somewhat obviously limit risks owing to error and fraud as well. It is noteworthy that members
were given “authority to set lower limits,” which, coupled with the tables in the appendix, seems to clearly speak
about choices owing to differing customer bases and, in general, to varying risk tolerances among institutions
along with their intent to manage these risks. These certainly include but are not limited to settlement (BOE 2009).

20

To determine whether or not a real-time payment scheme in the United States will
provide real-time delivery of payment messages while keeping fraud in check, it
seems that the outcome may hinge, at least in part, on how real-time payments are
rolled out. Rather than presuming that all the technology and protections are in
place with nothing missed, the path the United Kingdom and others have chosen
suggests it may be prudent to advance with any new system in a progressive way—
first accumulating real information and real experience before more fully opening
up the service. Systems will always have to be constantly evaluated to determine if
they are keeping pace with or if they can keep pace with fraud threats that may
emerge. That will involve observing the system deliberately, but also looking at and
continuously delving into experiences and learnings from those that have gone
before. Given that there will be unknowns with any new scheme, if the chosen
examples are any indication, it may be right to roll out a faster scheme with wellconsidered borders and constraints to assess what the issues and affects will be
here.

21

III. Other Risks
Overview
For payment schemes to thrive and endure, message conveyance must be reliable
and secure and the associated transfer of funds (settlement) must be effective. This
working premise set up discussion of the core risks—settlement, operations, and
security—that have been covered thus far.
Moving beyond the three core matters, there are at least two other risks that should
be considered. First is that the United States has no public authority with broad
power over payments systems. This represents a fundamental difference in the U.S.
banking landscape compared with countries that have implemented a faster
payment scheme. Second is that coordinated, broad-ranging efforts to develop a
faster payment scheme may take time and energy away from more significant
changes in payments—in other words, there is the opportunity cost. Each will be
considered in turn.
The U.S. Banking Environment—Context
The financial institution (FI) landscape in the United States is vastly different from
any other country’s. Table 4 may provide a useful illustration to frame the U.S.
circumstance and facilitate further consideration of issues.

22

Table 4: Key elements of payment environments: Summary (select nations29)

Australia

147

No31

Ability of FI
overseer(s) to
mandate/build
faster system?30
Yes

Brazil

179

No

Yes

Chile

21

No

Yes

1,374

No

Yes

80

No32

Yes

India

416

No

Yes

Japan

303

No

Yes

South Korea

20

No

Yes

Mexico

54

No

Yes

Poland

37

No

Yes

Singapore

49

No

Yes

South Africa

21

Yes

Yes

Sweden

100

No

No

Switzerland

251

No

Yes

United Kingdom

208

No

Yes

12,064

Yes

No

Country

China
Denmark

United States

Number of
financial
institutions (FIs)

Multiple FI regulatory/
supervisory agencies?

Sources: World Bank (2012); “The Global Banking Resource” (query of banks, credit unions, and savings institutions as of February
1, 2016), BIS (2014), various central bank websites

29

In this table, the number of FIs and supervisors/regulators (from the Global Banking Resource and the 2012
World Bank survey, respectively) consider conventional banking to be commercial banks and savings institutions
that provide basic banking services to consumers and businesses. The table excludes capital market intermediaries,
security broker-dealers, investment banking, and others that may be considered FIs in some contexts.
30
The values in this column reflect the author’s review of material from the BIS’s CPSS Red Book or information
available from central bank websites (BIS 2014). In some cases, the responses may oversimplify aspects of or
circumstances in any given country.
31
Australia has a single supervisory agency for deposit-taking institutions. FIs with no depositor funding
(investment banking) are subject to other regulatory control.
32
The Danish Central Bank (DN) and the Danish Financial Supervisory Authority coordinate to regulate the Danish
financial markets. The DN is responsible for the payments system.

23

Referring to the table, the first issue that stands out is the sheer number of
different financial institutions (FIs) to coordinate among in the United States as
compared to other countries. Although an argument can be made that not all FIs
need to be on board to accomplish the goal of offering a faster payment service in
the United States, most argue otherwise. In particular, the Federal Reserve’s
“Strategies for Improving the U.S. Payment System” repeatedly calls for ubiquity in
any faster payment solution (FRB 2015). The “Effectiveness Criteria” of the Faster
Payments Task Force reinforces the theme (FPTF 2016). Thus, the number of
institutions to bring on board in the United States implies a challenge here that
hasn’t been faced elsewhere. The United States has 10 times as many FIs as the
second largest country (China) and between 29 to just over 600 times as many FIs
as any other country on the list. The full implications of this issue could vary
depending on the final approach taken to move ahead with faster payments.
However, the expansiveness of the U.S. market suggests that coordination across
the range of issues—from cost and timing to competition and service—could be
nontrivial, and in any case is unlikely to parallel the experience of others.
In addition to the difference in numbers of institutions involved in U.S. banking
versus that of other countries, the oversight structure in the United States also
stands out as unique—it is more fragmented compared to other countries. This has
implications for both the development of a faster payment scheme and the ongoing
administration of it. However, the chart does not singularly or fully illustrate
governance issues in payments. Payment policy matters are often carved out of
conventional regulatory and supervisory regimes with some or all of the governance
delegated to specially commissioned bodies of experts or oversight groups. The
following examples may be useful in getting a clearer picture of the landscape,
highlighting two key governance differences in the U.S. circumstance versus that of
other countries.
The Role of Public Authority
Looking deeper into the regulatory landscape of various countries is insightful. For
example, the “Payment Systems Regulator” (PSR) is responsible for the payment

24

systems industry in the United Kingdom. PSR governance involves coordinating
across several regulatory regimes and competition authorities both within and
outside the United Kingdom. These include the Bank of England, the Prudential
Regulation Authority, the Financial Conduct Authority, and the Competition and
Markets Authority. In this light, the number of bodies involved with UK payment
governance may not appear vastly different from the United States.
Importantly, the PSR has strong regulatory and competition powers specific to
payments that include giving directions, taking targeted actions, and setting
standards.33 They can singularly impose requirements regarding system rules
across the banking landscape in the United Kingdom, and they can amend
agreements relating to payment systems, including fees and charges. They can also
investigate behavior that isn’t consistent with their directions, taking action when
they judge behavior of the market or participants to be counterproductive to their
(PSR’s) intent. Their policy statement includes an insightful summation of the
extent of their power noting a desire to collaborate, while also noting the extent of
their authority.
Our approach is collaborative but where evidence shows the payment
systems industry is failing to deliver greater competition, more innovation
and greater benefits for businesses or consumers, then we won’t hesitate to
apply our powers (PSR 2016).
Another example is in Australia. The Reserve Bank of Australia attends to
payments and expresses a light touch when it comes to imposing change in the
payment system, as the following passage notes.
The Bank's objectives and approach to regulation of the payments system are
shaped by its governing legislation, along with the intent of the legislators….
33

While the PSR is new, established in 2015, faster payment change in the United Kingdom was driven by a body
with a similar circumstance. The “Faster Payments” initiative was rooted in the Office of Fair Trading’s mandate to
the UK banking industry to develop a new domestic payments capability. The UK Payments Council, no longer in
existence, was tasked with implementing the Faster Payments Service. The PSR appears even more empowered
than predecessor entities—to mandate and move change in payments for the United Kingdom as it may choose.

25

The Bank is required to control risk and promote efficiency and competition
in the payments system. However, there is a presumption in favour of selfregulation by the industry, with the Bank only intervening where the
industry is unable to address a public interest concern. This means that in
practice the Reserve Bank has imposed regulation in a relatively narrow
range of payments system activity (RBA 2016).
This passages strikes a tone reminiscent of the Federal Reserve’s approach to
payments oversight. However, the Australian central bank holds a similar
advantage to the United Kingdom and in contrast to the U.S. circumstance. Where
Australia’s central bank found it useful to be more involved than just through
consultative or collaborative power, they moved accordingly. Following the failure of
the country’s privately sponsored faster payment initiative, “Me and My Bank Online” (MAMBO), Australia’s central bank explained a change in course while
conducting a review of innovation in the payments system.
As has been stated on a number of occasions during the course of this Review,
the Reserve Bank’s focus is…where decisions are not just in the hands of a
single player. Innovations of this nature have proved difficult to achieve….
[T]he difficulty of achieving cooperative innovation also constrains the
innovative solutions that can be built upon common systems by individual
players on a proprietary basis…. [A]ddressing these issues has the potential
to unlock significant future innovation, resulting in ongoing improvements to
the efficiency of the payments system.
The conclusions outline a change in approach by the Payments System
Board…. In recognition that there are impediments to the payments industry
collectively delivering solutions that would be valued by businesses and
consumers, the Board intends to be more proactive in setting…its
expectations for the services that the payments system should be able to offer
in the future. The Board believes that this will help to overcome some of the

26

coordination problems that have been evident in the payments system over
the years (RBA 2012, 1).
Even though the Payments System Board in Australia has continued to stick very
close to its overarching principle of taking a light touch when it comes to imposing
regulatory mandates on the payments system, it has the power to dictate outcomes
and has indicated that the follow-up initiative to MAMBO would not be permitted
to fail.
While the Board is optimistic that the approach…is likely to lead to better
cooperative outcomes, it acknowledges that there is the possibility that the
industry will still not be able to reach agreement…. Given that the strategic
objectives determined by the Board are matters that the Board considers to
be in the public interest, it would then need to consider whether there is a
case for meeting the objectives by other means. For instance, it might seek to
establish infrastructure itself, or use its powers under the Payment Systems
(Regulation) Act 1998 to require the objectives be met (RBA 2012, 21).
It is clear that the Australian Reserve Bank can compel progress and results and is
“prepared to provide more detailed guidance where it considers it necessary” (RBA
2012, 21).
The National Bank of Poland (NBP) uses express power for establishing payment
solutions, leaving open the source from which solutions may originate but
remaining clear about its absolute authority in the space.
The President of the NBP may issue recommendations (e.g. to modify the
operational rules of the system) and decisions (e.g., on authorizing the
operation of a system or on closing it),…

27

The provisions of Art.17 of “the Act34” stipulate that an entity intending to
operate a payment system shall apply to the President of the NBP for the
approval...
[T]he National Bank of Poland assesses the operational rules of the system,
in terms of their compliance with Polish law and ensuring efficient and safe
operation of the system.
Should, as the result of the assessment, the NBP state that the system does
not comply with the…requirements, the…NBP refuses to grant their
approval for the operation of the system (NBP 2004).
In general, central banks (or specially designated entities) in other countries enjoy
the power to compel change in one fashion or another, as the three preceding
examples illustrate. This is not to say every faster payment initiative in every
country has been mandated; however, the usefulness of an empowered, centralized
rulemaking body cannot be overstated.35 Importantly, those that have implemented
faster payments schemes have had one entity that has been able to promulgate the
rules for the system and build a core infrastructure or coordinate or compel the
building of it.
The vastness of the U.S. FI market coupled with the possibility that any number of
different stakeholders may not see things the same makes it reasonable to point out
the general circumstance about the lack of distinct authority in the United States as
a potential risk to the effective implementation of faster payments here. Despite the
fact that the United States has an abundance of financial sector regulators, none
currently have the ability to mandate a faster payment solution. Even as things
may advance, those helping drive the change at the moment are not clearly
34

Act on the Settlement Finality in Payment Systems and Securities Settlement Systems and on the Rules of
Oversight on These Systems (Dziennik Ustaw No. 123/2001, item 1351, as amended) of August 24, 2001.
35
Sweden is an example of a nation that implemented a faster payment scheme without a central payment
authority having binding tools to compel the change. The Riksbank (Sweden’s central bank) indicates it exerts
control through communication and (“moral suasion”) where it believes there are deficiencies in safety or
efficiency. However, progress to move to a faster scheme remained stalled until the Swedish Finance minister
threatened legislative action.

28

empowered. No one can compel results, nor can they singularly resolve conflicts or
control plans, rules development, or processes. Although the Federal Reserve is
currently leading the effort, it has no controlling authority and cannot assure an
outcome. It has highlighted this fact repeatedly.
For some years, members of the public have told us with increasing frequency
and intensity that they see the United States falling behind other nations in
the speed and security of our payment system. We hear all the time that the
Federal Reserve should do something about this. But, despite our multiple
roles, the Federal Reserve does not have broad authority to simply
restructure or redesign the payment system (Powell 2015).
All of that said, the United States’ forward progress to date has been positive and
results seem promising. Nevertheless, it bears pointing out that the governance
footing of advocates for a faster scheme in the United States is noticeably weaker
than those countries that have gone before. Many of these schemes would arguably
not be at their current stage without a central authority’s ability to mandate the
change or at a minimum, hold the specter of a mandate or other pressure over the
market.
Governance: Clear Authority for Rulemaking
Participants in a payment scheme need to know what to expect. They also need to
know from whom to expect it. The answer to this matter revolves around rules—to
whom they apply, in what manner they apply and who actually applies them. In
order for a ubiquitous, faster payment scheme to take hold and be more than just a
novelty, a strong rule set with a good understanding of how it will be administered
will be essential. How the rule construct will evolve for faster payments in the
United States is unclear at this stage.
In the places where faster payments have evolved, there does not appear to be an
analogue to U.S.-style federalism, where agencies such as the Consumer Financial
Protection Bureau (CFPB), the Federal Reserve, the Federal Deposit Insurance

29

Corporation, the Office of the Comptroller of the Currency, and the Federal Trade
Commission share oversight responsibilities with state bodies, such as state
attorney generals and state banking authorities. How rulemaking and
administration may evolve could get muddier still with bodies such as NACHA and
the Electronic Check Clearing House Organization (ECCHO). Each body has long
promulgated payment rules specific to their members, relative to ACH and check,
respectively. Both NACHA and ECCHO have shown an interest in the evolution of
rulemaking relative to faster payments.
There is no intent to suggest that there hasn’t been or won’t be ongoing cooperation
among the various supervisory and rulemaking bodies and overseers. However, in
point of fact, there are multiple entities that could end up as part of the equation
since governing rules are under no particular or singular regulatory (or other) body.
That increases the risk of confusion or even failure to properly align prospective
parties. For example, the Federal Reserve’s Faster Payments Task Force has laid
out the basic legal and governance issues.36 Meanwhile, the CFPB asserted a degree
of authority in the space by being the first regulatory body to publish faster
payment “principles.”37 In some ways, this unfolding of events highlights the fact
that how rulemaking will advance and apply over the longer run in the United
States is uncertain.
Without substantial effort to avoid it, rules and regulations could emerge that are
contradictory in nature or simply suboptimal in terms of how they need to be
traversed. At a minimum, the challenge relative to this aspect of governance could
delay or prolong the effort. In the worst case, it could scuttle the effort.
What it all seems to suggest is that the issue of rulemaking may need to be elevated
and emphasized in importance. In the end, effective coordination and strong
governance is as crucial as anything on the list and could arguably be the most
challenging of the points that have been discussed. A credible, well-established

36

See fedpaymentsimprovement.org/wp-content/uploads/fptf-payment-criteria.pdf.
The CFPB released its “Consumer Protection Principles: CFPB’s Vision of Consumer Protection in New Faster
Payment Systems” on July 9, 2015. files.consumerfinance.gov/f/201507_cfpb_consumer-protection-principles.pdf.
37

30

system of governance that brings a strong rule set with clear legal underpinnings is
necessary to help promote certainty and confidence, both of which are essential for a
payment system’s success.
Conclusion: The U.S. Preference for Private-Sector Solutions?
The opportunity cost of pursuing faster payments can be considered in the context
of eras of money described in The History of Money by Jack Weatherford (1997).
Weatherford suggests that today's free market systems were made possible by the
advent of coins, which were followed by paper money, then modern banking and
finance. In describing the current state of money he noted the following:
A new struggle is beginning for the control of [money].... We are likely to see
a prolonged era of competition during which many kinds of money will
appear, proliferate, and disappear in rapidly crashing waves. In the quest to
control the new money, many contenders are struggling to become the
primary money institution of the new era (Weatherford 1997, 266).
The combination of “company points” and product offerings of a large online
merchant like Amazon effectively makes them an emerging alternative economy,
and it has implications for what happens to money at some point (Castronova 2014,
69–70). In talking about Amazon and a host of other virtual currency circumstances,
conditions, and issues, Edward Castronova said:
A profusion of little currencies creates pressure to move value among them.
In Facebook’s case, this pressure spurred the creation of its behind-the-scenes
digital value transfer system. We will probably go from having many small
independent currencies to “ecosystems” of transferable currencies, and from
there to global systems of virtual transfer (Castronova 2014, 196).
While more is known about the current state of money than Weatherford could have
known when he speculated on things at the turn of the century, it is still uncertain
just how money may evolve and the pace at which it will or may change. What is
known is that money is indeed changing. Technology has not only made it easier to
31

move money, it has made it easier to invent money. The following passage provides
context and adds more recent specifics.
Between September 2010 and August 2011, I directed a National Science
Foundation-funded research team devoted to surveying the development of
emerging economic institutions in the gray area between the virtual and the
real. We did case studies of some important products in internet space and
sent research assistants on exploratory missions into more than two dozen
online media systems. One result stood out: every single one of these places
had an internal market with its own currency. Every one of those currencies
could be exchanged against the U.S. dollar, either in a reasonably robust
market or through direct sales with a reputable company. The global
metasystem of digital value transfer is…waiting to leap into public view
(Castronova 2014, xvii–xviii).
At the moment, one of the focal points in payments is making platforms faster. A lot
has gone into that around the world and much more seems yet to come. A risk in
this endeavor is ending up with an industry focus that is too narrow—platforms or
transfer schemes only. It could cause key payment participants to end up missing
an important change—in money itself—as opposed to the mechanisms and
processes for moving it. Castronova goes to the heart of what some in the industry
are looking at in the context of “faster.”
It seems ideal to have just one form of money so that everyone knows how to
speak about the value of things. Money is like a language—the entire system
runs faster when we all speak the same language (Castronova 2014, 64).
Perhaps one of the more important conclusions to consider in the realm of “what
instead” or “what next” deals with a reckoning of technology and how fast it moves.
It is also where many viewpoints merge in terms of their consultation about the
future.

32

The social change induced by technology has become chaotic in both the
colloquial and the technical sense…. Something will happen, but we don’t
know what. Rather than guess the future, then, the best approach is simply
to be flexible. Flexibility, response, and adaptation in the face of currency
change [is key] (Castronova 2014, 128).
As work progresses to reach consensus on what to improve in the extant payment
mechanism and how to do it, it seems worthwhile to pay close attention to what is
happening with money, or what could happen. Nothing should stop the efforts
directed at improving the current systems for facilitating exchange. However, the
singular pursuit of a faster scheme that envisions world monetary systems
continuing to be based on the things they've been based on for centuries could cause
us to overlook or miss the next evolution of money. It would have been of little use
to invest in improving the systems for speeding the exchange of cowrie shells or yap
stones as the turn was made toward paper money and banking. The more flexible
and agile the underpinning system(s) and the more there is an eye to what is
happening that could change the game, the better.

33

IV.

Appendix
Personal account transaction limits (FPS)38
One-off and forward dated payments

Standing orders

Personal
Branch
Bank of Scotland

Phone

Online

Branch

Phone

Online

£25,000

On request

£25,000

£99,999

£99,999

£99,999

Personal
£25,000

Personal
£15,000

Personal
£50,000

Personal
£25,000

Personal
£15,000

Personal
£50,000

Premier
£50,000

Premier
£50,000

Premier
£50,000

Premier
£50,000

Premier
£50,000

Premier
£50,000

Citibank

£100,000

£100,000

£25,000

£100,000

£100,000

£25,000

Clydesdale

£100,000
*A*

£5,000

£25,000

£100,000

£100,000

£100,000

Co-operative

£100,000

£100,000

£20,000

£100,000

£100,000

£20,000

first direct

£10,000

£10,000

£10,000

£10,000

£10,000

£5,000

Halifax

£25,000

On request

£25,000

£99,999

£99,999

£99,999

HSBC

£10,000

£10,000

£10,000

£10,000

£10,000

£5,000

Lloyds

£25,000

On request

£25,000

£99,999

£99,999

£99,999

M&S Bank

£10,000

£10,000

£10,000

£10,000

£10,000

£5,000

Nationwide

£9,999

£10,000

£10,000

£9,999

Not
permitted

£10,000

Natwest

£20,000

£20,000

£20,000

£99,999.99

£99,999.99

£99,999.99

£100,000

£100,000

£100,000

Barclays UK

Northern Bank Ltd T/A Danske Bank

£100,000

£25,000
daily

Online
£25,000
daily
Mobile
£10,000
daily

Royal Bank of Scotland
Including Ulster Bank

£20,000

£20,000

£20,000

£99,999.99

£99,999.99

£99,999.99

Santander UK plc

£100,000

£100,000

£25,000

£100,000

£100,000

£100,000

Yorkshire Bank

£100,000
*B*

£5,000

£25,000

£100,000

£100,000

£100,000

*A* and *B*: Applies only to payments made between Clydesdale Bank and Yorkshire Bank. In addition to the per-transaction limits listed here, most types of
accounts have a daily limit on the total amount you can send.

38

fasterpayments.org.uk/about-us/transaction-limits, last viewed on January 1, 2016.

34

Business/ corporate account transaction limits (FPS)39
Business/
Corporate
Bank of Scotland

Barclays UK

One-off and forward dated payments

Standing orders

Branch

Phone

Online

Branch

Phone

Online

N/A

On request

£99,999

£99,999

£99,999

£99,999

Business
£25,000

Business
£15,000

Business
£50,000

Business
£100,000

Business
£100,000

Business
£100,000

Corporate/FI
£250,000

Corporate/FI
£250,000

Corporate/FI
£250,000

Corporate/FI
£250,000

Corporate/FI
£250,000

Corporate/FI
£250,000

Corporate / FI – via Direct Corporate Access (DCA) £250,000
Citibank

£250,000

£250,000

£250,000

£250,000

£250,000

£250,000

Clydesdale

£100,000
*A*

£10,000

£100,000

£100,000

£100,000

£100,000

Co-operative

£100,000

£100,000

£20,000

£100,000

£100,000

£20,000

HSBC

£10,000

£10,000

£250,000

£10,000

£10,000

£250,000

Lloyds

N/A

On request

£99,999

£99,999

£99,999

£99,999

£99,999.99

£99,999.99

£99,999.99

Natwest

£100,000

£100,000

Business
£20,000–
£30,000
Corporate/FI
£100,000

Northern Bank Ltd T/A Danske Bank

£100,000

£50,000

£100,000

£100,000

£100,000

£100,000

£99,999.99

£99,999.99

£99,999.99

Royal Bank of Scotland
Including Ulster Bank

£100,000

£100,000

Business
£20,000 £30,000
Corporate/FI
£100,000

Santander UK plc

N/A

£100,000

£100,000

N/A

£100,000

£100,000

Yorkshire Bank

£100,000
*B*

£10,000

£100,000

£100,000

£100,000

£100,000

*A* and *B*: Only applies to payments made between Clydesdale Bank and Yorkshire Bank and vice versa. In addition to the ’per transaction’ limits listed here,
most types of account have a daily limit on the total amount you can send.

39

fasterpayments.org.uk/about-us/transaction-limits, last viewed on January 1, 2016.

35

V.

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