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Yahoo
4 days ago
- Business
- Yahoo
Fed's ISO ‘big bang' hits next week
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Financial institutions that seek to send payments via the Federal Reserve's Fedwire Funds Service must migrate to a new international standard come Monday. That's when banks are required to begin using the ISO 20022 standard for electronic payments they choose to send over that Fed real-time settlement rail. While the central bank delayed an implementation deadline multiple times, after a preliminary 2023 proposal, it says this one is for real. The Geneva-based International Organization for Standardization gave the world the ISO 20022 standard over two decades ago to encourage financial institutions around the world to embrace a more modern messaging system. Some 70 countries have already adopted the standard that provides operational efficiencies, more data-sharing and less outdated batch-processing. The shift will allow banks around the world to communicate, share data and operate by the same rules for cross-border payments, said Elias Ghanem, the global head of consulting firm Capgemini's Research Institute for Financial Services. The change has a host of implications for international commerce, he explained during an interview. Global payments are 'deep and complex,' said Ghanem, who formerly worked for Visa and PayPal Holdings.'It is essential that we all speak the same language. We harmonize the data. We harmonize the rails.' The Federal Reserve already put its new real-time payments system FedNow on the standard when it was launched in 2023. The bank-owned Clearing House also has its private real-time rail, the RTP network, using the ISO standard. The new standard will be particularly important for banks and credit unions seeking to send cross-border payments because many foreign financial counterparts already use the standard. The Fedwire channel handles some $4.7 trillion in worldwide commerce every day, with international commerce mainly conducted in U.S. dollars. 'This is a massive upgrade for the entire payment industry,' said Finzly CEO Booshan Rengachari. 'It is an upgrade for the entire world mainly because the dollar is the global currency.' Charlotte, North Carolina-based Finzly is a software provider to financial institutions that has been working to make sure its clients are prepared for this moment. It's not a gradual transition, but rather a 'big bang conversion' that happens Monday when the Fed shifts the Fedwire service to the new standard, Rengachari explained. It's the biggest event to happen in payments during his decades-long career in financial services, Rengachari said. The new standard not only allows banks and their clients more agility and efficiency in pursuing business opportunities, it also helps them work together to thwart threats, Ghanem said. 'We all reduce risk,' Ghanem said. 'We all fight together.' Most major U.S. banks are prepared for the Fed shift to ISO 20022, though some smaller institutions in the U.S. may not be, Ghanem said. If they haven't been able to implement the technology upgrade themselves, presumably they're working with an outside vendor to do so, he said. Mihail Duta, a director at financial services software provider Finastra in New York, said he also believes that most U.S. banks are prepared for the new standard. His London-based company, with a U.S. headquarters in Lake Mary, Florida, has been working with both the Federal Reserve and financial institutions to get them ready. 'We've touched every single customer to ensure that the right software is in place, that they've done their testing, that they have everything they need to process,' Duta said. While there could be some outlier situations with snafus, said Duta, he added that he doesn't expect any major banking disruptions on Monday. 'Given all the prep work and all the diligence that was done, I think it's unlikely that something dramatically wrong will go on July 14,' he said. To brace for any potential mishaps, Finastra is advising its financial institution clients to start a little earlier than usual on Monday to give themselves more processing time to 'work through any wrinkles,' he said. 'All providers, including the Fed, are thinking the same way: It's all hands on deck,' Duta said. 'I can tell you, from a Finastra perspective, nobody's taking off July 14.' That's the case for Rengachari's crew too. In fact, the company has reservations at nearby hotels for some of the firm's 200 employees that will be working more hours than usual. One of the key benefits of the technology associated with the new standard is its ability to carry more data with a given transaction. For instance, international purchase orders can carry documents, like an invoice, and more information about a particular shipment. The reports that banks can generate regarding those transactions will also benefit from the richer data, as will their fraud-fighting capabilities, Duta said. 'The foundation has been laid for a major transformation, and that's going to be a good thing for the entire industry,' Rengachari said. Regional U.S. banks that don't adopt the standard immediately may be less troubled because they're mainly focused on local transactions, Ghanem said. Mainly, it could mean delays for some payments, he said. But being in tune with the global payments ecosystem is ultimately important for all U.S. financial institutions, and may give those banks that are up-to-date on the standard an edge, he said. The new ISO standard links to payments systems run by different organizations, such as the Belgium-based international cooperative Swift, allowing them to better communicate with each other. Swift, which is a messaging system for global payments, has allowed users a more gradual conversion to the ISO standard, but is also moving toward a November 22 deadline to complete that transition. As for the Fedwire milestone Monday, Rengachari said he's confident it will go smoothly, after what he expects will be a busy weekend. 'If anything doesn't go the way it is planned, we will be there to make sure things are back on track,' he said. Rengachari has also prepared to celebrate Monday after the transition is complete, lining up a bottle of champagne to be opened. Clarification: The story has been updated to clarify that the Fed hadn't previously postponed the ISO standard implementation deadline set in its final notice. It had previously contemplated earlier implementation dates before the final notice. Recommended Reading Fed delays start of new Fedwire standard
Yahoo
23-06-2025
- Business
- Yahoo
How Fiserv jolts the bank stablecoin market
The advancement of the GENIUS Act has thrust stablecoins into the spotlight, with Fiserv being the latest firm to enter the market, hoping to reach a wide range of financial institutions that face pressure from fintechs and large banks. Fiserv said it would launch a digital asset platform, including a stablecoin, FIUSD, that will be part of Fiserv's banking and payments menu by the end of 2025. Additionally, the bank technology company and PayPal plan to make their stablecoins, FIUSD and PYUSD, interoperable. Both of these moves, announced Monday morning, would add drastic scale, opening stablecoins to thousands of financial institutions and PayPal's base of more than 430 million consumers and 36 million merchants. It also joins a fast-growing market of stablecoin issuers that includes a consortium of large banks, major retailers such as Amazon and Walmart and early mover banks such as Societe Generale and Vantage Bank. "Not having a stablecoin is like not having a Rolex years back," Elias Ghanem, global head of Capgemini Research Institute for Financial Services, told American Banker. "Announcement doesn't mean adoption, but early adopters, early launchers, will have higher adoption." With stablecoins, part of the battle is to quickly build a base of users to juice network externalities. Fiserv has more than 10,000 financial-institution clients, processes more than 90 billion transactions each year and has more than 6 million merchant locations. Fiserv plans to make FIUSD available through its existing payment technology at no added cost. FIUSD will use stablecoin infrastructure from Paxos and Circle, and will make the stablecoin available on the Solana blockchain. "Together with our other cloud-native banking and merchant platforms, we believe FIUSD will provide our clients with the efficiency and optionality they need to thrive in the evolving banking and payments ecosystem," Takis Georgakopoulos, chief operating officer of Fiserv, said in a release. Fiserv did not respond to a request for issuers have dominated the stablecoin market, a trend threatening traditional bank deposits if the stablecoin market were to grow dramatically. The expectation that banks will need to respond provides a potential way for Fiserv to expand its client relationships by supporting banks' issuance of FIUSD and by enabling banks to use Fiserv's digital asset platform to issue their own branded stablecoins. "After the GENIUS Act was passed last week, we expected to see a flurry of announcements," Gareth Lodge, an analyst at Celent, told American Banker, adding that integrating the stablecoin into Fiserv's existing offerings for banks and merchants is "a huge step forward and democratizes the opportunity." Fiserv also plans to partner with other stablecoins, announcing an initial collaboration with PayPal, which issues PYUSD, as well as with Paxos. PayPal has spent the past two years partnering with other payment firms to add scale for PYUSD, with support for cryptocurrency trading on PayPal's payment app and its Venmo transfer app helping users build balances that can be used for payments — either in PYUSD or traditional currency. PayPal did not return a request for comment by deadline. "Together with Fiserv, we will help bridge the gap between traditional financial systems and new technologies, enabling faster, more cost-effective, and globally accessible payment options for merchants," Frank Keller, executive vice president at PayPal, said in a release. "There will be no one stablecoin that is universally accepted, so interoperability between Fiserv and PayPal is a major step, but also increases the pressure on others to follow suit," Lodge said. In addition to stablecoins, Fiserv will support deposit tokens, which it said will "maintain the benefits of stablecoins in a more capital-friendly structure for banks." That would enable community banks, credit unions and other financial institutions in Fiserv's network to counter large banks such as JPMorganChase, which is developing a deposit token — an alternative to stablecoins that use a reserve asset structure that is more closely tied to the issuing bank. Fiserv's stock jumped more than 4% in early trading Monday as investors cheered its planned stablecoin. While most analysts said the adoption curve for the thousands of banks in Fiserv's network could be long, there are other benefits for the bank technology vendor. The stablecoin could help Fiserv's broader position among smaller banks against other financial technology vendors, Jeffries said in an analyst research note. "While the digital asset platform should provide small community banks/credit unions with a way to stay up to speed with stablecoins/digital assets, we'd expect the adoption curve among smaller banks to be slower than large banks," Jeffries said. "If anything, we think the announcement could help with branding among smaller banks as FI can pitch offering smaller banks similar tech that is being developed by their larger competitors." Fiserv's strategy will soon face counter moves. Competitors will likely announce more deals such as Fiserv's stablecoin and partnerships with PayPal and Circle, William Blair analysts said in a research note. "These initiatives will only gain traction, however, if they are pursued on a universal platform, in our opinion. This is why we like Fiserv's deal with Circle, the issuer of USDC, but question the decision to launch a branded stablecoin," Jeffries said. "We see little shared functionality or value in a market littered with individual coins when USDC offers a liquid, functional standard with an established issuer who is building a potentially viable ecosystem." The ability to support stablecoin commerce via Fiserv's Clover point of sale system and offering smaller financial institutions an ability to compete in the stablecoin market are "smart moves," William Blair said. Joey Pizzolato contributed to this story. 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