FPC Offers Tech Guide for Implementing Instant Payments

When using instant payments, financial institutions should consider using immediate transaction confirmation, automated processes for handling errors and rejections, and continuous operational readiness, according to new guidelines released Sept. 13.

The U.S. Faster Payments Council’s (FPC) Work Group, which developed the guidelines, said that financial institutions must enhance their tech infrastructure, fraud detection mechanisms, and compliance strategies to manage increased risks associated with instant transactions.

The guidelines focus on the RTP (Real-Time Payments) network used to send money electronically between banks, and the FedNow instant payment service that the Federal Reserve offers to banks and credit unions to transfer funds for their customers, and the impact that those services have on financial institutions’ operations.

“The advent of instant payments has revolutionized the financial landscape, offering unparalleled speed, convenience, and efficiency,” the FPC document reads. “As financial institutions embark on their journey to adopt instant payment capabilities, they must navigate a complex array of operational considerations to ensure a smooth and successful implementation.”

Recommendation highlights include: implementing real-time settlements; continuous intraday liquidity monitoring; stress testing and scenario analysis; predictive analytics; use of artificial intelligence for future liquidity needs and decision-making’ “24x7x365” maintenance and operations; escalation procedures; performance monitoring; and specialized training for employees.

One of the greatest challenges for institutions’ transition from traditional Automated Clearing House (ACH) and wire transfers to instant payments include reconciliations for receiving banks, according to the FPC document.

Solutions include using real-time reconciliation systems using the pacs.002 message – an internal reconciliation that can ensure appropriate credit once the transfer is accepted, according to the guidelines. Other suggestions include using automated reconciliation processes, which FCP said is “crucial to managing an instant payments rail,” due to its increased efficiency and minimization of error compared to manual data entry.

Additional challenges mentioned in the document include exception management within environments where immediacy “leaves little room for traditional processing delays.”

“These developments mark a significant evolution in the financial landscape, requiring proactive adaptation and a keen focus on operational efficiency, security, and regulatory compliance that may require material investments in governance, talent, operating model design, policy and procedure updates, vendor partnerships, business intelligence reporting and communications, and risk management,” the document states.