Travis Everett, Chief Operating Officer (COO) of National Merchants Association (NMA), has shared key insights with Crowdfund Insider on FedNow, the new instant payments and transfer service offered by the US Federal Reserve. The new service became operational this past week, with 35 financial firms approved to leverage the service.
NMA is a pro-business advocate and payments acquirer which aims to transform the financial services industry.
Before NMA, Travis had a successful career working for both startup and Fortune 500 companies. Everett attended Air Force Community College and the Allied Business School and is a veteran of the United States Air Force, where he provided world-class security for the Vice President of the United States.
Travis commented on the recent FedNow announcement and discussed other key industry developments.
Our conversation with Travis Everett is shared below.
Crowdfund Insider: What is FedNow and how does it differ from different payment systems in the U.S.? What financial institutions are allowed to participate?
Travis Everett: FedNow is a government instant payment infrastructure developed by the Federal Reserve – I like to think of it as a government-run Zelle. The plan is to roll it out in phases slowly, and the first phase is actually happening right now. The first release has a super baseline function and is really only suitable for things like account transfers and bill pay.
Unlike Zelle, which is a peer-to-peer platform offered by several major banks, the idea for FedNow is that it will allow users to send and receive money directly to and from their bank accounts in an instant, 24 hours a day, 365 days a year. On the other hand, traditional payment systems, like Automated Clearing House (ACH) and wire transfers, usually take one to two business days for settlement. FedNow works with financial institutions of all sizes in every state. Some participating institutions include: U.S. Bank, JPMorgan Chase, and Peoples Bank. The biggest difference between FedNow and privately owned instant-payment platforms is the Federal Reserve’s involvement. As a central bank-operated service, it is subject to government oversight and regulation.
Crowdfund Insider: What is your perspective on the implementation of FedNow and its potential impact on the broader landscape of real-time payment systems?
Travis Everett: From a critical standpoint, the implementation of FedNow raises valid concerns regarding its necessity and potential implications on the existing real-time payment landscape. While the Federal Reserve justifies its decision by emphasizing the need for a faster and more accessible payment system, the question remains whether such a substantial investment is warranted, given the presence of private sector alternatives that already serve similar purposes.
One of my major concerns when it comes to FedNow is the risk of creating a monopolistic scenario where the presence of FedNow could deter private payment providers from competing and innovating the market, leading to a lack of competition and, most importantly, a lack of choice for consumers and businesses. Another major concern is security and privacy. Centralized systems like this may present attractive targets for bad actors seeking to exploit vulnerabilities to compromise user data. While it may hold promise for expediting payments, we need to critically assess its necessity, potential impact on competition and the extent to which it addresses cybersecurity and data privacy concerns.
Crowdfund Insider: Some critics argue that with the rapid pace of technological advancements, FedNow has the potential to become outdated or obsolete in the near future. What is your forecast regarding the future impact and trajectory of FedNow?
Travis Everett: Honestly, it is not a huge surprise that we are slowly transitioning and shifting away from paper currencies, with some businesses even refusing to accept cash and shifting to card-only payments. Further, as we all have seen, digital wallets are increasingly popular. Whether you’re using an Apple Watch to pay at your local coffee store or forgot your traditional wallet and are paying with your iPhone’s digital wallet function, payments are modernizing with advanced technology in order to keep up with the demands and needs of consumers. We are witnessing a digital evolution in nearly all industries.
When traveling, bank customers are taking out less and less international currency and relying on credit cards with low international transaction fees. In
this sense, I can understand why the Federal Reserve sees this as a logical next step. Digital wallets and contactless payments are the future, and FedNow could take this a step further. I predict that 50 years down the road, FedNow will have the capability to completely replace cash. I do think it is interesting that the government wants to implement FedNow when they have not been able to create any substantial legislation around all the current cryptocurrencies while they are pretty much creating their own.
Crowdfund Insider: While you’re not a proponent for FedNow, you can understand why the government would implement an instant-payment system like FedNow. Besides technological advancement, do you see any other benefits to the program?
Travis Everett: While I may not advocate explicitly for FedNow, I recognize the rationale behind the government’s decision to implement an instant-payment system like FedNow. Beyond technological advancement, I can also see its potential to improve financial inclusion by providing real-time payment capabilities to underserved and unbanked communities. However, careful consideration of its implementation, potential drawbacks and ongoing evaluation of its impact will be necessary to ensure a well-balanced and effective real-time payment system. Also, it is important to remember that there are private-sector, real-time payment platforms that already exist.
Crowdfund Insider: What is your perspective on the role of government regulation in the financial services industry?
Travis Everett: The question of government regulation in the financial services industry is a complex and contentious issue. While some regulation is necessary to protect consumers, ensure market stability and prevent financial crises, too much regulation can hinder innovation and market efficiency. As a leader in the payment processing space, I have often found that no matter what type of government regulation is put in place, one group, either merchants, consumers or card processors, will always think they should be getting more out of the deal.
Additionally, the pace of technological advancements in the financial services industry almost always outpaces regulation, making it hard for the government to keep up and resulting in outdated laws that fail to address emerging risks.
Crowdfund Insider: Are there any other ongoing financial legislations you’ve been monitoring?
Travis Everett: Yes, I’ve been closely monitoring The Credit Card Competition Act, which has the goal of opening payment processing networks to more competitors in the hopes of lowering fees. The government should not be overreaching and meddling with something that doesn’t require their attention. There are several economical issues in the United States that should be a focus in 2023, but credit card fees are not one.
Crowdfund Insider: In your opinion, what would be the solution to address the issue of high swipe fees?
Travis Everett: I think the first step for small businesses is to look for a better merchant service provider that advocates for them, allowing them to hopefully lower their interchange rate and ensure they are not paying any unnecessary fees. Today, primarily because of COVID, consumers are more accepting of cash discounts and surcharge methodologies. All merchants, regardless of their business type or location (ie. high risk or low-risk) should explore surcharges and cash discounts in order to identify and select the option that works best for them and their customers.