Real-time payments are driving digital transformation and have become a key focus area for financial services across industries. As businesses continue to invest in tools to improve customer experience, real-time payments are a solution that unlocks immediate value. The demand for this technology has demonstrated consistent growth in recent years, and the real-time payments market itself

is expected to expand by 33% to a market value of $277 billion by the end of 2032. 

Unlike legacy payments technologies, which are subject to 9-to-5 hours of operation, lengthy time delays and

well-documented fraud risks, real-time payments enable businesses to transact instantaneously, 24/7/365, and with greater confidence in the security of their settlement. They also reduce credit risk and catalyze business growth with newfound capabilities to serve clients more effectively. 

As with all transformative technology, it is critical to explore the compliance landscape and consider the regulatory frameworks in place that ensure risk management is adequately addressed. 

Regulatory Power

The U.S. banking system is regulated by state and federal governments, depending on how a bank is chartered. Some banks with a national reach are regulated by both. The three federal regulators include The Federal Reserve (the Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). 

Real-time payments services are regulated by these three organizations and are governed by the existing payments regulatory framework in place. These regulations include the

Electronic Fund Transfer Act, with implementing regulations including Regulation E, and Article 4A of the Uniform Commercial Code. 

The rapid development of real-time payments technology has prompted The Fed to institute adjustments to its existing framework to encompass its additional capabilities. Take its

October 2022 rule, for example. Following the launch of FedNow, the Fed’s instant payments service, the Federal Reserve Board issued a new rule that governs fund transfers executed through the service, scoped to ensure “legal certainty and clarity on the rights and obligations of parties to a transfer over the FedNow Service.”

As the technology continues to develop, The Fed, FDIC, and OCC may issue additional regulatory measures to ensure organizations can reap its benefits while maintaining prudent risk management policies. 

What are some examples of regulated technology enabling real-time payments?

A key technology enabling real-time payments is private permissioned blockchain, which operates in sharp contrast to traditional payments platforms. This technology enables banks to offer their corporate clients the ability to make secure, instantaneous payments around the clock.

Unlike permissionless systems which are publicly accessible and virtually impossible to regulate, private permissioned blockchain is accessible only to specifically approved and authorized participants and operates entirely within the existing regulatory perimeter of the U.S. banking system.

The immutability of this technology results in a dramatic reduction in fraud incidence, which correspondingly reduces the costs to prevent and respond to fraud cases. These losses cost banks billions of dollars per year, with a large multiple of that figure spent preventing, investigating and remediating fraud. With this technology, businesses can pay suppliers and vendors at any hour, 365 days a year. The resulting productivity strengthens their capacity to serve clients more efficiently and accelerates the U.S. economy. 

 What does the future hold for real-time payments regulation?

Real-time payments are not new, but the adoption of the most advanced payments technology is growing across various industries around the globe. As the technology continues to evolve, responsible risk management policies issued by the regulatory bodies in place will support this innovation and continue to drive its implementation across sectors. 

The Federal Reserve’s official launch of its FedNow service in July is a clear signal that legacy institutions, government regulators, and private providers alike are pushing ahead to ensure businesses of all sizes reap the benefits of instant payments. 

• SEO Powered Content & PR Distribution. Get Amplified Today.
• PlatoData.Network Vertical Generative Ai. Empower Yourself. Access Here.
• PlatoAiStream. Web3 Intelligence. Knowledge Amplified. Access Here.
• PlatoESG. Carbon, CleanTech, Energy, Environment, Solar, Waste Management. Access Here.
• PlatoHealth. Biotech and Clinical Trials Intelligence. Access Here.
• Source: https://www.finextra.com/blogposting/25436/real-time-payments-in-the-regulatory-landscape?utm_medium=rssfinextra&utm_source=finextrablogs