COVID-19 RESOURCES AND INFORMATION: See the Atlanta Fed's list of publications, information, and resources; listen to our Pandemic Response webinar series.

Promoting Safer Payments Innovation

Promoting safer payments innovation is one of the Atlanta Fed’s high priority initiatives. We are engaging with and influencing financial technology firms to practice responsible innovation. Staff in Supervision & Regulation, the Retail Payments Office, the Retail Payments Risk Forum, and Legal are working together to advance this priority.

The Atlanta Fed plays several key roles in the payments industry, including operator, supervisor, and researcher. Our district is also a major hub for domestic payments—approximately, 70 percent of U.S. payments flow through Atlanta, earning it the nickname of "Transaction Alley."

Our priority has three broad initiatives:

  1. Engage with stakeholders broadly and develop partnerships within the fintech community to share, educate, and collaborate.
  2. Experiment and conduct proofs of concepts with emerging financial technology to solve the Bank's own business problems and enhance our understanding of the payments system.
  3. Explore opportunities and risks in payments innovation and identify areas where we can offer guidance.

See the About Our Work section to learn more about this strategic initiative.

  • About Our Work

    Innovation can improve payments speed and efficiency while also expanding inclusion to serve those historically left out of the financial system. However, at the same time, rapid technological advances can also introduce risks to the payments system and thus present challenges for policymakers and regulators.

    Given the Fed’s mission to promote the accessibility, efficiency, and integrity of the payments system, we at the Atlanta Fed have a keen interest in safe innovation. So along with payments industry stakeholders and Federal Reserve System colleagues, the Atlanta Fed is working to both encourage payments innovation and safeguard consumers and the payments system. Consumer spending, after all, accounts for roughly two-thirds of the nation's gross domestic product. In the interest of channeling payments innovation responsibly, we aim to better understand the many benefits of financial technology (or fintech) as well as the changes and risks most likely to affect the payments industry.

    The Atlanta Fed is uniquely positioned to promote safer payments innovation. The Retail Payments Office, based at the Atlanta Fed main office, is a payments network operator offering automated clearing house (ACH) and check payments products and services to financial institutions, and provides thought leadership to the industry through research and information-sharing. As a supervisor, we examine some of the largest fintech firms—also known as "significant service providers" to which banks outsource core services. We also examine state-chartered banks that are members of the Federal Reserve System, and many of those institutions have developed their own fintech solutions. Finally, as a convener and research institution, we are exploring payments system design and risks in technological innovation, and are bringing people together to share, educate, and collaborate.

    We are taking a three-pronged approach to this work: engage, experiment, and explore.

  • Engage

    The Atlanta Fed is leveraging existing and developing new partnerships with fintech firms and banks that work with fintechs. The goal is to help influence the direction of innovation so that firms are more likely to incorporate security early in the development process. We are using our unique supervisory expertise and payments system operations experience to deepen fintech firms' understanding of safe payments processing. The Atlanta Fed and fintech firms are collaborating to identify areas to influence and actions to produce healthy outcomes for firms, consumers, and the payments system broadly. Through collaborations with the Atlanta Fed, fintech firms not only sharpen their knowledge of the regulatory landscape and data and payments security but they also tap the Federal Reserve System’s deep reservoir of evidence-based intelligence on financial inclusion.

    Alongside its work with fintech companies, the Atlanta Fed is establishing ties with academic institutions and the wider payments community in the Southeast to convene experts and gather and disseminate information. In addition, the Atlanta Fed is offering its regulatory and payments expertise to help southeastern universities develop fintech-focused curricula to fuel the payments industry’s expansion and evolution.

    Read more about our efforts to engage in the 2019 annual report.

     

  • Experiment

    The Atlanta Fed is testing emerging technology to solve its own business problems and understand fintech solutions. We are likewise evaluating ways to employ fintech to serve both the public and the financial institutions that use our payment services. For example, we are studying artificial intelligence and machine learning to quickly perform tasks such as identifying potentially fraudulent transactions among vast volumes of payment information.

    Read about some of the outcomes of our innovative efforts to improve payments on the Federal Reserve's FedPayments Improvement website.

  • Explore and communicate

    As we explore developments in payments innovation, we will be researching policy issues related to risks and gaps we identify, and will share this work broadly.

    We will also be looking at how technology can both expand and limit financial inclusion. Improved technology can fundamentally ease access to the financial system, making payments more efficient, easier, and cheaper. Yet some digital payment services effectively limit financial inclusion by locking out cash users, who consequently may have a harder time accessing goods and services. The impact of fintech on financial inclusion is complex. In fact, the evolution of fintech is upending the traditional idea of financial inclusion as simply moving people without bank accounts into the mainstream banking system—for example, people are using smartphone apps to manage their personal finances without having a bank account. Atlanta Fed staff are conducting ongoing research meant to spur both conversation and additional study on redefining financial inclusion.

    Listen to a podcast that touches on how fintech can expand financial inclusion.
  • Publications

    As Fintech Transforms Payments, the Atlanta Fed Seeks to Guide Innovation
    Last year, the Federal Reserve Bank of Atlanta launched a multipronged strategic priority aimed at helping to balance innovation and safety in the payments industry. Explore our 2019 annual report, which looks at how fintech has changed the landscape of payments and how the Atlanta Fed seeks to help guide that innovation.
    Federico Mandelman, a Research Economist and Associate Adviser in the Research department of the Atlanta Fed, during the recording of a podcast episode
    "You Can Build the Infrastructure from Zero": A Conversation about Digital Adoption in Emerging Economies
    Much has been written about the digital revolution's impact on developed economies, but what about developing and emerging economies? The Economy Matters podcast features an Atlanta Fed economist who discusses his research into the question. podcast
    illustration of a dollar sign symbol overlaid with a circuit board from a computer
    Atlanta Fed Holds "Office Hours" Session
    The Atlanta Fed considers encouraging safe payments innovation to be one of its top strategic priorities. Read about a recent Atlanta Fed event where fintechs met with experts from the Atlanta Fed and the Board of Governors to discuss payments security, regulation, financial inclusion, and other matters.
    FraudClassifier model addresses inconsistent fraud classification
    The new FraudClassifierSM model enables payments stakeholders to classify fraud in a simple and consistent manner. For organizations, the key advantage of the model is the ability to classify fraud regardless of payment type, payment channel, or other payment characteristics.
    Delivering Benefits of Faster Payments to the Underserved
    Learn how faster payments could help cash-strapped consumers mitigate misalignments between the time that incoming funds are received and the time that payments need to occur.
    Comparing Means of Payment: What Role for a Central Bank Digital Currency?
    Discover the potential benefit that a central bank digital currency (CBDC) could provide in the context of existing payment mechanisms.
    Observations from the FooWire Project: Experimenting with DLT for Payments Use
    Find out how the Federal Reserve Board used distributed ledger technology (DLT) to build a payment system. This small-scale experiment called the "FooWire Project" highlighted the potential of DLT for certain payment uses.
    Token- or Account-Based? A Digital Currency Can Be Both
    Discover the common distinction made between "token-based" and "account-based" digital currencies and how this distinction is problematic because Bitcoin and many other digital currencies satisfy both definitions.
  • Contact us

    To help support responsible innovation, staff routinely communicate with banks, technology firms, and other stakeholders. If you are interested in discussing topics on financial innovation and technology, please complete the form and briefly describe your request. Be aware that we do not respond to commercial solicitations.

    We look forward to hearing from you.


    Michael Johnson
    Executive Vice President, Supervision, Regulation, and Credit

    Richard Jones
    Senior Vice President, General Counsel, Legal

    Mary Kepler
    Senior Vice President, Risk and Compliance

    Cheryl Venable
    Executive Vice President, Retail Payments Office


    Shari Bower
    Retail Payments Office

    Nell Campbell-Drake
    Retail Payments Office

    Ana Cavazos
    Legal

    John Pelick
    Supervision, Regulation, and Credit


    Lali Shaffer
    Supervision, Regulation, and Credit

    Trish Supples
    Retail Payments Office

    Jessica Washington
    Retail Payments Risk Forum

    Julius Weyman
    Retail Payments Risk Forum