The Future of Payments

5 BANKING PERSPECTIVES QUARTER 4 2018 Banking Perspectives is the quarterly journal of The Clearing House and the Bank Policy Institute. Its aim is to inform financial industry leaders and the policymaking community on developments in bank policy and payments. The journal is a forum for thought leadership from banking industry executives, regulators, academics, policy experts, and industry observers. Established in 1853, The Clearing House is the oldest payments company in the United States. It is owned by the world’s largest commercial banks, which collectively hold more than half of all U.S. deposits and which employ over 1 million people in the United States and more than 2 million people worldwide. Its affiliate, The Clearing House Payments Company L.L.C., which is regulated as a systemically important financial market utility, owns and operates payments technology infrastructure that provides safe and efficient payment, clearing, and settlement services to financial institutions. It clears almost $2 trillion each day. The Bank Policy Institute (BPI) is a nonpartisan public policy, research, and advocacy group, representing the nation’s leading banks and their customers. BPI’s members include universal banks, regional banks, and the major foreign banks doing business in the United States. Collectively, BPI’s members employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth. EDITOR Greg MacSweeney DESIGN & PRODUCTION Big Yellow Taxi, Inc. Copyright 2018 The Clearing House Association L.L.C. All rights reserved. All content is owned by The Clearing House Association L.L.C. or its licensors. The views expressed herein are not necessarily those of The Clearing House Association L.L.C., its affiliates, customers, or owners. Any use or reproduction of any of the contents hereof without the express written permission of The Clearing House Association L.L.C. is strictly prohibited. D E P A R T M E N T S 6 Contributors Information on the authors from this edition. 102 Bank Conditions Index A quantitative assessment of the resiliency of the U.S. banking sector. 104 Research Rundown Highlights from academic research on banking issues. 72 Tokens and the Travel Rule It’s time to rethink transparency in payments in an age filled with cybersecurity threats. by Alaina Gimbert and Stephanie Heller, The Clearing House 78 Unintended Consequences? SWIFT’s Customer Security Programme could lead to derisking, although that isn’t its intent. by Thomas C. Baxter, Jr., Sullivan & Cromwell 86 Should Non-Banks Be Eligible to Open Fed Bank Accounts? Growing demand by non-banks payment firms for direct access to U.S. settlement systems raises questions. by Barak J. Sanford and Daniel Bufithis-Hurie, Promontory Financial Group, an IBM Company 94 Strengthening and Streamlining Bank Capitalization Regulation Three core principles should inform the design of bank capital regulation. by Jeremy C. Stein, Harvard University, and Robin Greenwood, Samuel Hanson, and Adi Sunderam, Harvard Business School 1114 Avenue of the Americas 17th floor New York, NY 10036 212.613.0100 600 13th Street NW Suite 400 Washington, D.C. 20005 202.289.4322 The Clearing House Bank Policy Institute 64