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Technology transitions pave the road for the future

May 2011

“The U.S. payments system will continue to change,” stated William Barouski, executive vice president at the Federal Reserve Bank of Chicago at the America’s Community Bankers (ACB) 2006 annual meeting. “This statement is just as true today as it was then,” Barouski recently remarked. “The U.S. payments system has shifted into high gear and is moving at full speed toward an all-electronic payments and processing environment, fueled by technology and changing consumer and business behavior,” Barouski continued.

With the number of electronic payments growing to nearly 80 percent of all noncash payments based on the 2010 Federal Reserve Payments Study data, we are seeing widespread acceptance of technology at the consumer level. The combination of advanced technology and consumer acceptance is dramatically reshaping how we view retail payments from the largest multinational financial institutions to small and mid-sized community banks and credit unions across the country.

Banking services are being rethought and reinvented to bring the highest level of convenience, flexibility, efficiency and security to consumers. 

In this environment of dramatic change ─ rapid adoption of electronic payments processing,  enhanced technologies, innovative payments and new players ─ the Federal Reserve Banks are investing strategically in technology and infrastructure changes positioning us to offer progressive products and services while providing a secure, reliable and resilient payments system.

To continue meeting the demands of this ever-shifting payments industry, Federal Reserve Financial Services are focusing on current and adaptable technology platforms positioning us to support customers’ changing payment strategies and requirements. As such, we have mapped various transitions in technology platforms across all service lines.

Our technology roadmap is designed to preserve maximum efficiency and robust security while paving the road to further innovations in payments.

Technology initiatives drive security enhancements

The Federal Reserve Banks continually strive to maintain high standards for the security and reliability of our services and regularly upgrade technology components used to access our services. Beginning now and over the course of the next couple of years, we will implement technology enhancements in many service areas including FedCash® ServicesFedLine® Access Solutions and Fedwire® Services.  These initiatives are designed to help us maintain the secure, efficient standards you have come to rely on from us.

We are committed to meeting financial institutions’ demand for currency and coin, maintaining the quality and integrity of currency in circulation and ensuring that financial institutions have ready access to FedCash Services. Initiated in 2008 and continuing this year, this is one of the first milestones on our technology roadmap, which includes developing an enhanced technology platform for delivering FedCash Services that will help streamline and standardize the cash depositing and ordering experience. The mid-2011 release will include new security controls for managing subscribers. “These upgrades will provide customers with increased security and improved automation tools,” remarked Mark Gould, senior vice president and chief information officer for the Federal Reserve’s Cash Product Office. The article, Moving towards the future state of FedCash Services in this issue of FedFocus provides more detail about the progress toward the future state of FedCash Services.

Another notable transition gaining speed is the initiative supporting the new user authentication process for FedLine Access Solutions Subscribers. This initiative is designed to streamline access to our services by embracing advanced security technologies. You can read more about this initiative in the article, Enhanced FedLine user authentication helps to ensure secure and reliable access to our services also in this FedFocus issue.   

Platform modernization mapped for efficiency

Two additional milestones on our technology roadmap are the multi-year Check 21-enabled Services and FedACH® Services platform modernization initiatives. “The Federal Reserve Banks are tracking changes in technology and upgrading platforms so we can provide you with the highest quality products and services,” commented Cheryl Venable, senior vice president and product manager for the Federal Reserve Bank’s Retail Payments Office at the BAI TransPay conference in March 2011.

The Check 21 platform modernization has been in the development stages for the past couple of years and in mid-2011 testing is scheduled to begin. The full transition to the new platform is expected to be complete in mid-2012. This transition will result in a centralized processing infrastructure, moving from multiple electronic processing sites to one to support high-quality, efficient processing.  

The FedACH Services platform modernization will improve time-to-market and flexibility for future product development. The FedACH Services platform modernization will also result in a fully centralized processing environment. This platform modernization is expected to begin in 2014 and conclude in 2015.

Both modernization initiatives are expected to support high-quality, efficient services while providing a flexible and scalable infrastructure in an increasingly electronic environment.  More details about these platform modernization efforts will be provided in future issues of FedFocus.

The transitions planned are all designed to upgrade our technology platforms and maximize the value of customer connections to the Federal Reserve Banks by enabling new and enhanced transaction and information services. You will hear more about these technology transformation initiatives going forward.   

Driving customer value with technology transitions

You also rely on Fedwire Services for mission-critical, same-day transactions. As stewards of this essential component of the payments system infrastructure, we continue to modernize and enhance our large-value payments platform to help ensure resiliency and security to meet emerging business needs. Our efforts in 2011 focus on expanding the value of funds transfer as a payment mechanism through implementation of the Fedwire Funds format changes to support extended remittance information and payment notification. These changes will enable future Fedwire Service enhancements and payment services and improved cover payments, while enabling your institution to offer new options for enhanced business-to-business payment services and straight-through processing to your customers.

The changes in the payments industry are anticipated to continue moving at high speed. To meet these ever-shifting demands, it is critical to enhance our technology platforms that support our services so we can continue to deliver innovative, efficient, secure and reliable solutions to meet your requirements. 

The pace of change and the complexity of today’s technology can be overwhelming at times.  Our goal in the coming months and years is to help you easily navigate the twists and turns of each initiative as it comes, while keeping you aware of the upcoming milestones on our technology transformation route.

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