WASHINGTON (Reuters) – The U.S. Federal Reserve is stepping-up its focus on payment security as the industry reaches a “critical juncture” driven by new technologies, Federal Reserve board governor Jerome Powell said on Wednesday.
Speaking at a conference in New York, Powell said the U.S. central bank would early next year launch a study analyzing payment security vulnerabilities and also planned to create new working groups focused on reducing the industry costs associated with securing payments.
“Rapidly changing technology is providing a historic opportunity to transform our daily lives, including the way we pay. Fintech firms and banks are embracing this change, as they strive to address consumer demands for more timely and convenient payments,” said Powell.
“It is essential, however, that this innovation not come at the cost of a safe and secure payment system that retains the confidence of its end users.”
The Fed does not have complete authority over the U.S. payment system, but it has led industry efforts to make it faster and easier to use. The central bank also leads the 160-member Secure Payments Task Force.
Powell’s comments underline growing concerns among financial market participants and regulators about the risks cyber thieves pose to the financial system following a series of recent incidents.
Last year, SWIFT, the global financial messaging system, disclosed it had suffered hacking attacks on its member banks including the high-profile $ 81 million heist at Bangladesh Bank.
During that incident, hackers broke into the computers of Bangladesh’s central bank and sent fake payment orders, tricking the Federal Reserve Bank of New York into transferring the funds. [here]
Powell said on Wednesday new fintech payment companies posed “significant challenges to traditional banking business models” and that the payment system was reaching a “critical juncture.”
His comments echoed those of Barclays Chief Executive Officer Jes Staley who on Saturday warned payments would be the next battleground for banks amid increasing competition from fintech players and tech giants including Amazon and Facebook.
Reporting by Michelle Price; Editing by Chris Reese