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Addressing the Needs of the Public Sector Challenges and Opportunities in the U.S. Government’s Payment System: Domestically and Internationally . Presentation Before The World Bank Payments Reform Seminar November 4, 2003 Richard Gregg, Commissioner Financial Management Service

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Addressing the Needs of the Public SectorChallenges and Opportunities in the U.S. Government’s Payment System: Domestically and Internationally

Presentation Before The

World Bank Payments Reform Seminar

November 4, 2003

Richard Gregg, Commissioner

Financial Management Service

U.S. Department of the Treasury

Moderated By: Theresa Trimble, Manager, Fiscal Services

Division of Reserve Bank Operations and Payment Systems

Board of Governors of the Federal Reserve System


Emerging technology driving change in the u s government key themes
Emerging Technology Driving Change in the U.S. Government—Key Themes

  • Internet technology a driving force in change for individuals, corporations, and governments conducting financial transactions

  • Electronic payments and supporting data are key

  • Simplifying interfaces and accounting a priority


Four major business lines within fms
Four Major Business Lines within FMS Government—Key Themes

  • Payments

  • Collections

  • Governmentwide Accounting

  • Debt Management


The landscape
The Landscape Government—Key Themes

  • Payments We Make:

    --FMS makes 85% of U.S. Payments

    --Annual Dollar Value: $1.6 Trillion

    --Annual Transactions: 918 Million (77% Electronic)

  • Payments We Receive:

    --Annual Dollar Value: $ 2 Trillion

    --Number of Transactions: 337 Million (30% Electronic)


Where we are forms of payments
Where we are—Forms of Payments Government—Key Themes

  • Payments We Make

    --ACH (Credit)

    --Fedwire

    --Check

  • Payments We Receive

    --ACH (Debit)

    --Fedwire

    --Credit Cards

    --Check


Objectives key factors laying foundation for future payments and collections
Objectives—Key Factors Laying Foundation for Future Payments and Collections

  • Lower Costs

    --Increase Electronic Transactions

    --Reduce Interchange Fees

    --Streamline Processes

  • Maximize Cash Management

    --Improve Funds Collected

    --Enhance Cash Forecasting

  • Ensure Proper Security

    --Web Based Systems

    --Lockboxes


Objectives laying foundation for future payments and collections continued
Objectives—Laying Foundation for Future Payments and Collections (Continued)

  • Simplify Processes

    --Single stream of data for agencies

    --Fewer Systems

  • Take advantage of technology in U.S. financial infrastructure

    --Federal Reserve—check truncation legislation

    --Commercial Financial Institutions—pilot new approaches; better service

    --Use email to inform customers

  • Think and act globally in our approaches to financial transactions


Payments we receive challenges and opportunities ahead
Payments We Receive: Challenges and Opportunities Ahead Collections (Continued)

  • Conversion to Electronic Payments

    --High Dollars/Low Transaction Volume

    --Market Research

    --Incentives vs. Mandates


Payments we receive challenges and opportunities ahead1
Payments We Receive: Challenges and Opportunities Ahead Collections (Continued)

  • EFTPS (Taxes)

    --Web Based

    --Scalable and Secure

    --Payment Confirmation and History

    --Linking to Tax Filing Software

    --PIN and Password through mail

    --Some resistance


Payments we receive challenges and opportunities ahead continued
Payments We Receive: Challenges and Opportunities Ahead (Continued)

  • Pay.gov (Non-tax)

    --Web Based

    --Scalable and Secure

    --Forms plus payment

    --Verification Engine

    --Backlog of Agencies

    --Comfort with current Processes


Payments we receive challenges and opportunities ahead continued1
Payments We Receive: Challenges and Opportunities Ahead (Continued)

  • Check Conversion

    --Check clearing/ACH rules

    --Float Reduction and minimize paper

    --Notice to individuals

    --Corporate checks


Payments we receive challenges and opportunities ahead continued2
Payments We Receive: Challenges and Opportunities Ahead (Continued)

  • Check Truncation (Check 21)

    --Federal Reserve Leadership

    --Effective in one year

    --Voluntary

    --Quality of Images

    --Image Replacement Document (IRD): Quantity and Costs

    --Option for Lockboxes


Payments we receive challenges and opportunities ahead continued3
Payments We Receive: Challenges and Opportunities Ahead (Continued)

  • Integrated Agency Processes

    --Payment and Accompanying Information Link to Agency System

    --Fewer “Stove Pipe” reporting sources/more commercial products

    --Easier interface with FMS


Payments we receive challenges and opportunities ahead continued4
Payments We Receive: Challenges and Opportunities Ahead (Continued)

  • Security and Privacy

    --Web introduces new challenges

    --Checks present challenges too

    --Convenient yet secure

    --Secure Yet Protect Privacy

    --Contingency planning and testing

    --Innovation and vigilance


Payments we make challenges and opportunities ahead
Payments We Make: Challenges and Opportunities Ahead (Continued)

  • Conversion to Electronic Payments

    --High Percentage of Transactions But High Volume Remaining

    --Incentives vs. Mandates

    --Paying the “unbanked”

    --Market Research


Payments we make challenges and opportunities ahead continued
Payments We Make: Challenges and Opportunities Ahead (Continued)

  • Payments Plus

    --Sufficient information for all parties

    --Accounting data that “fits”

    --Streamlining FMS Processes

    --Debt Collection


Payments we make challenges and opportunities ahead continued1
Payments We Make: Challenges and Opportunities Ahead (Continued)

  • Innovative Products

    --Internet Payment Platform (IPP)

    --Stored Value Cards

    --Debit Cards

    --Opportunities Driven by Business Case


Payments we make challenges and opportunities ahead continued2
Payments We Make: Challenges and Opportunities Ahead (Continued)

  • Security and Privacy

    --Electronic Payments Provide Many Pluses

    --Fraud can occur despite payment mechanism

    --Enseal Technology for Treasury Checks

    --Anthrax Threat

    --Approaches to “close the loop”, I.E., easy confirmation


Agenda for the future
Agenda for the Future (Continued)

  • Focus on emerging technology

  • Address current infrastructure—tendency to hold onto current and outdated systems and infrastructure

  • Reduce the number of systems

  • Eliminate redundancy in data and information

  • Streamline databases, platforms, and tools

  • Drive toward less paper

    Sustain Excellence in Financial Transactions


Further information and communication
Further Information and Communication (Continued)

www.fms.treas.gov


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