Amendments to the Uniform Commercial Code: Implications for Real-Time Payments
Last month, we released an article describing how changes to the Uniform Commercial Code (UCC) create an opportunity for a new digital, real-time payment instrument in the United States. While FedNow, RTP, and other attempts at faster payments in the U.S. have been a focus of recent discussions in the payments community, the UCC code changes have received surprisingly little attention.
We’ve pasted the abstract of the article below and attached the full article (also available here) for Fintech Fundamentals subscribers. We hope this makes for an enlightening pre-Thanksgiving read!
Abstract
This article provides an overview of real-time bank-to-bank payments in the United States, examining the recent launch of FedNow and the challenges it faces in gaining traction against established payment platforms like PayPal and Zelle. Although bank-to-bank real-time payment solutions have gotten traction around the world, the U.S. has lagged behind. The core issue lies in the architecture of account-to-account (A2A) payment systems. Such systems necessarily require the coordination of multiple parties and their respective financial institutions, resulting in significant transaction frictions. The adoption of the new Article 12 of the Uniform Commercial Code (UCC) creates an opportunity for the introduction of a new direct and entirely digital real-time payment solution. These changes pave the way for more direct, efficient, and real-time payments and may pave the way to broader adoption of real-time payments in the U.S. The article draws a parallel to book entry transfers in the securities industry and argues that direct real-time payment through controllable payment intangibles (CPIs), the primitive created by the amendments to the UCC, may achieve similar efficiencies. It concludes by emphasizing that CPIs can coexist with A2A systems.
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great post!!