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Noting that "faster payments represent a distinct technology priority" for credit unions, NAFCU Vice President of Legislative Affairs Brad Thaler outlined for the Senate Banking Committee the association's support for the Federal Reserve’s efforts to develop a real-time payments system – FedNow Service – and also reiterated the need for a national data security standard.

The committee holds a hearing today focused on facilitating faster payments in the U.S. and will hear from a number of industry stakeholders, including the president of the Federal Reserve Bank of Kansas City and a representative from The Clearing House.

“To be operationally effective, a future real-time payments system must be able to reach all financial institutions and consumers – particularly those in Main Street America who depend on their credit unions for affordable access to financial products and services,” Thaler said. “NAFCU believes that the development of the FedNow Service is critical to achieving such ubiquity.”

Thaler shared data from NAFCU’s 2018 Annual Report on Credit Unions that showed industry support for a faster payments settlement option, including one that was developed by the Federal Reserve. NAFCU also supports the Fed’s intention to make the FedNow Service interoperable with other, private sector networks.

“It is also important that community institutions such as credit unions are able to secure fair access to real-time payments services; a goal that is currently shared by private sector operators, but best achieved with the participation of the Federal Reserve,” Thaler wrote. “As with its check and ACH services, the Federal Reserve maintains a policy of extending access to its payments services on fair and equitable terms to all institutions, including those in rural and remote areas.”

Thaler noted that while industry and government stakeholders are already committed to ensuring that payments are not only faster but safer, there is more that can be done.

“The Committee should recognize that these efforts would be greatly enhanced by a national data security standard or equivalent legislation, which would help establish shared responsibility for protecting the sensitive, payment-related information of American consumers,” Thaler said. “While the creation of the FedNow Service will certainly improve the resiliency of U.S. payment systems as a backup in the event of system outages or other failures, the greatest threat to consumer payments safety is the lack of meaningful security standards among merchants.”

NAFCU has worked with the Fed on its efforts to make the payments system faster and more secure for years. President and CEO Dan Berger also discussed the issue directly with Federal Reserve Governor Lael Brainard.

Following the Fed’s announcement of plans to develop the FedNow Service, NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt addressed credit unions’ priorities in an op-ed published earlier this month.

Credit unions can learn more about the FedNow Service and submit comments through NAFCU’s Regulatory Alert until Oct. 18.

Subscribe to NAFCU Today for more coverage of today’s hearing on faster payment systems.