It may be hard to believe but we’re rapidly approaching the end of 2021. Given some of the significant trends and developments this year, 2022 is likely to be a pivotal year for payments as well.
Below are a few notable observations and predictions that will shape our industry moving forward:
The ACH Network Will Continue to Grow.
The ACH Network is the true workhorse of the nation’s payments system. Its value to all Americans was highlighted by the successful distribution of Economic Impact Payments and advance Child Tax Credit payments this year. With the help of thousands of community banks, Americans received 163.5 million EIPs worth nearly $400 billion through the American Rescue Plan Act.
The ACH Network also continues to evolve to support community banks and their customers. As of March 18, 2022, the individual transaction limit on Same Day ACH entries will increase to $1 million. This rule change will open new use cases and business opportunities for community banks, and demonstrates the ACH Network’s commitment to address market demands.
Will Crypto Take Flight?
Bitcoin was designed by Satoshi Nakamoto in 2008 to disintermediate fiat currencies and the traditional financial system, but cryptocurrencies remain a niche investment class with limited utility for real-world goods and services transactions.
In March, PayPal launched a new service that allows users to convert their bitcoin holdings into fiat currencies to complete purchases with PayPal’s 29 million merchants. Although buyers do not directly exchange cryptocurrency with sellers, this action is still a step towards normalizing cryptocurrency and may spur more interest in the use of cryptocurrency as a medium of exchange.
Ultimately, it will be up to individual community banks to decide whether crypto products and services address their customers’ needs. Prudential and market regulators are closely scrutinizing the space to understand the wider economic implications of cryptocurrencies. Recently, the OCC joined with the Federal Reserve and the FDIC to launch a Digital Assets Sprint Initiative focused on developing common terms and definitions, assessing crypto use cases and risks, and evaluating regulatory gaps.
ICBA supports regulators’ efforts to provide greater clarity about cryptocurrencies and is helping keep community bankers informed about developments in this fast-moving space with topical articles and a dedicated resource library. Visit icba.org/our-positions-a-z/payment to learn more.
Get Ready to GO FAST!
Next year will be critical as community banks prepare for the launch in 2023 of FedNow, a new instant payment system developed by the Federal Reserve. With the power of instant payments, and additional functionality like Request for Payment, community banks will have new capabilities to improve business-to-consumer payments, as well as account-to-account payments and person-to-person payments.
Here are some key steps to take in 2022 to ensure your bank is ready:
Join the FedNow Community to get the latest intel, access pertinent educational resources, and provide feedback. Sign up today at frbservices.org/financial-services/fednow/community
Develop a staff education plan: Check out the Fed’s Instant Payment Education (frbservices.org) plan for a step-by-step guide to help prepare.
Talk to your core processor to learn about their plans to support the FedNow implementation, critical dates in their timeline, and how they can help your bank utilize this new payment system to the fullest. ICBA Bancard has also recently partnered with Finzly to offer an instant payments solution for community banks. Visit icba.org/bancard/finzly to learn more.
Stay engaged with ICBA: The ICBA Payments Team advocates for members to ensure that FedNow meets the needs of community banks. Have questions? Reach out to [email protected] and read ICBA NewsWatch Today to stay informed of important industry developments.
Brian Laverdure is ICBA’s vice president, payments and technology policy.