Academic journal article ABA Banking Journal

Payments at a Confluence

Academic journal article ABA Banking Journal

Payments at a Confluence

Article excerpt

A series of events--one dramatic, the others significant, but quieter--have pushed the current and future status of the U.S. payments system front and center.

The dramatic event is Target--the breach that just keeps getting worse. The situation has been a nightmare for consumers and financial institutions (and a windfall for card production companies). At the level of even 70 million affected cardholders (the figures are hard to know accurately), card-issuing banks will foot a $700 million-dollar bill if you estimate the reissue cost at $10 per card. That does not include costs associated with dealing with the resulting fraud and responding to alarmed customers.

The quiet events were the recent release of ABA's Deposit Account Fraud report and the Federal Reserve's Payment System Improvement paper. Taken together, the three events make clear that there are two distinctly different issues that are often merged together in the payments system debate: the transaction, and data safekeeping.

Transactions, which are a primary focus of the Fed paper, involves speeding up the payments system into a contemporary, real-time or near-real-time link of all parties. …

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