The 2004 Federal Reserve Retail Payments Study

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The Financial Services Technology
Consortium Empowering the Industry Through
Innovative Ideas
FSTCs2008 Annual Conference On the Innovative
EdgeSuccessful Strategies for Financial Services
Industry Navigators
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FSTCs2008 Annual Conference On the Innovative
EdgeSuccessful Strategies for Financial Services
Transforming an Industry Banking at the
Crossroads
Industry Navigators
3
Transforming an Industry Banking at the
Crossroads

• 2008 FSTC Annual Conference
• June 19, 2008
• Rich Oliver
• Federal Reserve Retail Payments Product Office

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Turbulent Times

• Too many options too little time too few
  resources
• Laws rules regulations are shifting
• Competition (in-house and out-of-house) squeezing
  margins
• Volatile economy confuses business cases
• Concerns about risk/fraud abound
• Globalization beckons seductively

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(No Transcript)
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Number of Noncash Retail Payments
6.7

• CAGR

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Composition of the Check Market
0

• 2006 distribution of checks by counterparty and
  purpose
• Percent of sampled population of checks

51

• Representative random sample of over 32,000
  checks.
• Sample population is about 40 of prime pass
  checks.
• Consumers write 58 of checks paid.
• Businesses/government receive 76 of checks paid.

Remittance
Remit/POS
POS
32
Income
25
Casual
17
16
6
7
13
5
3
C2B
B2B
C2C
B2C
B refers to business or government. Figures may
not add due to rounding.
Population is prime pass checks processed by
nine large commercial banks. Estimates exclude
0.2 of checks that could not be classified.
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The State of Electronification

• Electronic payments now over two-thirds of
  non-cash retail payments
• Debit card usage outstrips credit usage on a
  transaction basis
• ACH is a core network for payment (and payment
  information?) delivery
• Remote deposit capture and Check 21 appear to be
  on a fast path

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Cause and EffectWatchwords for the Time

• Understanding the marketplace
• Cost cutting/efficiency
• Sharp business case analysis
• Collaboration
• Outsourcing
• Pricing rationalization

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Even at the Fed

• Long-range strategies keyed to market events not
  specific dates
• 45 check processing sites now down to 17
• Torturous assessment of future Check 21 needs
• Working closely with other service providers on
  connectivity, standards, contingency, etc.
• Outsourcing major software project management
  work
• Pricing paper, well, like paper

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Gazing into the Future

• Checks fully electronified by end of 2009
• More and more sharing and outsourcing
• Managing convergence boils the water ACH or
  Check 21?
• B2B continues to languor
• Cyberworld challenges complicate things

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Forum for Retail PaymentsRisk Management

• Small research group at FRB Atlanta
• Focused promoting dialogue and collaboration
  among FIs, regulators, law enforcement, and
  others
• Sponsor research, education, meetings to
  facilitate mitigation
• Fill gaps, facilitate, not duplicate
• Externally driven agenda
• Just getting organized

13
The Financial Services Technology
Consortium Empowering the Industry Through
Innovative Ideas
FSTCs2008 Annual Conference On the Innovative
EdgeSuccessful Strategies for Financial Services
Industry Navigators
14
FSTCs2008 Annual Conference On the Innovative
EdgeSuccessful Strategies for Financial Services
Getting To Integrated and Interoperable Mobile
Payments
Industry Navigators