The moment that the Federal Reserve announced that they were going to become a real time payments operator, concerns over the possibility that the U.S. market would end up with a two-tiered real time payments market with some originators using The Clearing House RTP platform and others using the Fed’s FedNow service began to emerge.  Since then, ideas around how the two interoperate to provide seamless payment transactions and settlement have been discussed. 

As Finextra and other news outlets have reported, the Faster Payments Council published a whitepaper this week that does a really good job of clearly explaining how interoperability can be achieved, how transactions would flow and what the options for settlement could look like.  It looks at interoperability in three models where interoperability occurs at the point of origination, at the network level or through intermediaries.  It’s only 13 pages long including the appendix and I would contend it’s a “must read” for all those with interest in the payments industry.  Here’s a bit from the introduction:

Interoperability in a faster payment system can help to achieve seamless processing-both sending and receiving-of payment instructions across various payment solutions.  This can significantly benefit all players in the ecosystem if it provides access and reach to any end-user, regardless of the network their financial institution connects to.  Through interoperability, the ecosystem can promote competition, reach and scale. 

Overview provided by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.