Act of Congress: How America's Essential Institution Works, and How It Doesn't

Today, in an article titled "How Barney Frank foiled the banking lobby to form a new financial watchdog", the Washington Post ran an excerpt from the book discussing the Consumer Financial Protection Agency, the formation of which was a centerpiece of Dodd-Frank.

On the web:

• Silicon Valley firms claim new California data disclosure bill is “overbroad” - ArsTechnica - "If passed, the bill would allow an unprecedented amount of access to individuals to find out what companies know about us."
• The Man (Jack Dorsey) Who Made the Cash Register Obsolete - Inc. - "One guiding philosophy at Square is that technology should be so intuitive that no one stops to question how difficult it must have been to create. That philosophy is paying off."
• With Tablets, Businesses Ring Up at More Fanciful Cash Registers - New York Times - "With the advent of tablets, particularly the iPad, many stores have traded in their clunky cash registers for mobile devices."
• "Bankalytics" – Banks and Analytics - BankInnovation - "I feel the future of banks depends on how relevant they stay to the target market, based on how they analyse the Big Data in their databases."
• Bitcoin’s Last Mile Problem - TechCrunch - "The world needs Bitcoins to exist, even if the mass of humanity doesn’t use it."
• Online Sales-Tax Bill Could Get Senate Votes This Week - Storefront Backtalk - "The bill, known as the “Marketplace Fairness Act,” would allow states to require online retailers to collect sales tax, even if the e-tailer doesn’t have a physical presence in the state."
• Dunkin’ Donut email campaign showcases ongoing mobile payment endeavors - Mobile Commerce Daily - "Mobile payments are on the rise. And, this campaign helps the company solidify its place in the space."
• Are You the Weakest Link? - Retail Payments Risk Forum - "A basic tenet of security that we often mention in Portals and Rails is that experienced criminals attack the weakest points in the system."
• Small Banks Lead the Innovation Agenda: Are They Making the Elephants Dance? - "Today, we are witnessing numerous instances of smaller players spawning innovations across social media, self-service channels, mobile banking, pricing, payments etc. to deliver customer delight."

On the wires:

• American Express OPEN Simplifies Expense Tracking for Small Business with Launch of ReceiptMatch
• Clear2Pay and Earthport partner on low value clearing - "With the OPF Earthport Connect module, clients of the Open Payment Framework (OPF) will have out of the box connectivity to Earthport’s global payments infrastructure in over 50 countries."
• Consumers Want a More Seamless and Personalized Customer Experience From Their Bank - Cisco - "Overall, the report demonstrates consumer interest in more personalized, timely and valuable connections with banks…"
• ACI Worldwide Paves the Way to True Enterprise Payments with Universal Payments Platform - "The Universal Payments Platform is a solution that provides purpose-built payments functionality to orchestrate all aspects of payments processing for any payment type, any channel, any currency and any network."
• With Consumer Optimism Rising, Chase Blueprint Unveils New Initiative to Reinforce Positive Spending Habits - Drawing upon the expertise of Chase and respected experts, the Resource Center for Mindful Spending is a free knowledge center available at Chase.com/MindfulSpending.
• USA Technologies To Demonstrate Two New Cashless Payment Devices at NAMA OneShow - "The ePort G9 represents a redesigned, feature-rich offering for USAT’s popular JumpStart program. It will include all of the functionality of USAT’s NFC-enabled ePort G8, plus new features…"
• Boulder Valley Credit Union Introduces Tyfone Mobile Banking Financial Services - "One Tyfone client has reported more than a 10 percent mobile adoption from non-PC bankers, which in turn increases the ROI for the financial institution."

The Financial Crimes Enforcement Network (FinCEN) is part of the US Treasury Department where it reports to the Office of Terrorism and Financial Intelligence. FinCEN’s mission is to "safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities."

Last week, FinCEN's Director Jennifer Shasky Calvery spoke at the National Cyber-Forensics Training Alliance's CyFIN 2013 Conference in Pittsburgh. In her speech, she reviewed the activities of FinCEN in detail - from where it gets its data, its analysis process, and the upgrades it's been making to further improve its capabilities to fulfill its mission.

In addition, Calvery discussed FinCEN's work with respect to emerging payment systems - including "crypto-currencies" and virtual currencies, along with discussing FinCEN's work addressing account takeovers - particularly of small business accounts - and dealing with third-party payment processors. She's also leading FinCEN's efforts to form stronger partnerships with industry, regulatory, law enforcement, and international partners.

Director Calvery's speech is frankly a "must read" for anyone involved in emerging payments initiatives in the US. A PDF version of her speech is available for download from the FinCEN web site.

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 7.75%. Revolving credit increased at an annual rate of 0.75%, while nonrevolving credit increased at an annual rate of 11.0%."

The Financial Times is reporting that payment systems in the UK are going to be regulated "much like a utility".

Tuesday’s announcement of a consultation on the issue makes clear that the government wants to put the system for retail payments – including bank transfers, cheque clearing and credit card payments – under formal regulation by an existing authority.

The full consultation report, "Opening Up UK Payments", is available for download here.

The use of mobile phones to access a bank account, credit card, or other financial account became more prevalent in the Unites States last year, according to the Federal Reserve Board's latest report entitled, "Consumers and Mobile Financial Services 2013".

Mobile devices have increasingly become tools that consumers use for banking, payments, budgeting, and shopping. The Board's report looks at how consumers access their bank's services using mobile phones ("mobile banking"), at their payment for goods and services using mobile phones ("mobile payments"), as well as their use of mobile phones to inform their shopping decisions.

The full report can be downloaded here.

The Federal Reserve Board has published a report containing summary information on the volume and value, interchange fee revenue, certain debit card issuer costs, and fraud losses related to debit card transactions in 2011.

The Board does not plan to propose revisions to the Regulation II interchange fee standard or the fraud-prevention adjustment based on these survey data.

The report is the second in a series to be published every two years pursuant to section 920 of the Electronic Fund Transfer Act (EFTA).

The Federal Reserve has announced that, effective April 1, 2013, it will offer an expanded FedACH SameDay service for same day clearing of ACH transactions. The expanded service will feature the following modifications:

• Permits all SEC Codes except International ACH Transactions (IAT), Check Truncated Entry (TRC) and Check Truncated Entries Exchange (TRX)
• Allows credits as well as debits
• Accommodates business as well as consumer transactions
• Places no dollar cap limits other than those set by NACHA on check-conversion transactions

Participation in the service will continue to be on an opt-in basis, and there will be no changes to pricing or deadlines.

Terri Bradford of the Federal Reserve Bank of Kansas City has recently published an Payments System Research Brief entitled, "Where Social Networks, Payments and Banking Intersect".

This article reviews the extent of social network adoption, describes ways in which commerce and banking services are arising, discusses payment methods, and highlights some of the potential risks of these various interactions.

The full article is downloadable here.

The Federal Reserve Bank of Kansas City has published a new Economic Review article entitled, "New Debit Card Regulations: Initial Effects on Networks and Banks".

New regulations have pushed down the fees charged to merchants for processing debit card transactions, but the ultimate impact on merchants and consumers may depend on the debit card industry's new revenue strategies.

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 7.0%. Revolving credit increased at an annual rate of 1.0%, while nonrevolving credit increased at an annual rate of 9.5%."

The Federal Reserve Bank of Boston has published a public policy discussion document entitled, "Why Don’t Most Merchants Use Price Discounts to Steer Consumer Payment Choice?"

We find that steering consumers to debit and cash via price discounts reduces some merchants’ card costs. However, this cost reduction may be insufficient to offset the cost increase of administering price menus that vary by payment instrument. In addition, rewards buyers receive on credit card transactions may exceed the price discounts that merchants can provide. These factors may explain why steering via price discounts is not widely observed.

The full paper is here.

On the web:

• PayPal’s Ambitious Plans For Stores - Internet Retailer
• UK-based ERN Raises $2M For 'Big Data' Card Analytics - TechCrunch
• ‎ As EMV-Debit-Durbin Problem Festers, a Solution May Be on Its Way - Digital Transactions
• UAE Exchange collaborates with ElectraCard Services to Launch 'gocash' Prepaid Travel Card - AfricanBrains
• SimplyTapp Proposes Secure Elements In The Cloud - NFC World

On the wires:

• VeriFone NFC Managed Services to Drive China Mobile Commerce Network
• FDIC Survey on How Banks are Working to Meet the Needs of Unbanked, Underbanked
• Voltage Secure Stateless Tokenization Advances PCI DSS Audit Scope Reduction
• Digital River World Payments Offers Online Merchants Full Card Acceptance Services for AmEx
• CARDFREE Releases Study on Fast Food Restaurants Gift Card Sales and Redemption
• Western Union Now Offering Two Options for International Travelers

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 6.25%. Revolving credit increased at an annual rate of 4.75%, while nonrevolving credit increased at an annual rate of 7.0%."

The Consumer Financial Protection Bureau announced today that it intends to propose certain limited adjustments to our rule on international money transfers, as well as a brief extension of the date the rule would become effective.

Some regulated entities identified issues that pose practical challenges in implementing the new law. To address these issues, next month we will propose a narrow set of changes to the remittance rule. We’ll work on a fast track to finalize changes to the rule. The proposed changes would improve implementation of the new law while keeping the important new protections for consumers intended by the Dodd-Frank Act.

The Federal Reserve Bank of Boston has released a new report entitled, "Mobile Phone Technology: 'Smarter' Than We Thought".

This report examines in detail how near field communication (NFC) and cloud technologies address security for mobile payments at the retail point-of-sale (POS). It also provides a brief overview of security for two other mobile technology platforms, QR code, and direct carrier billing (DCB). Each technology manages and processes information uniquely; hence security practices and issues will vary with the technology deployed by each payments platform provider.

The full report is available here.

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 4.0% in the third quarter. Revolving credit decreased at an annual rate of 1.5%, while nonrevolving credit increased 6.5%. In September, consumer credit increased at an annual rate of 5.0%."

The Federal Reserve Bank of Minneapolis’ Payments Information and Outreach Office recently released the results of its 2012 Payments Fraud Survey.

Payments covered in the survey included transactions involving cash, check, debit and credit cards, automated clearinghouse (ACH), and wire transfers. The 2012 survey is similar to surveys conducted in 2010 and 2009; thus this report includes some trend analysis.

The UK Payments Council has an interesting educational portal, called Pay Your Way, for consumers to get a better understanding of how payments work in the UK.

The Pay Your Way website aims to help consumers by providing impartial information on the different payment methods available. The information helps you to compare their speed, cost, reliability and security, find out about new payment technology and ask an expert your questions about payments.

Good explanation of when and how to use a dozen or so common payment methods in the UK, including Faster Payments and even PayPal.

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 8.0%. Revolving credit increased at an annual rate of 6.0%, and nonrevolving credit increased at an annual rate of 9.0%."

A new report released by the European Central Bank (ECB) analyses the social and private costs of making retail payments in 13 European countries and discovers that they are substantial, amounting to around €45 billion, or almost 1% of their combined GDP. If extrapolated to cover the 27 Member States of the European Union (EU), these costs would be around €130 billion.

“This study is a true joint venture of the ECB and the national central banks involved,” said Benoît Cœuré, Member of the ECB’s Executive Board. “Its results underline how much retail payment services matter for European society and in the economy as a whole. The study will shed light on the debate about how the European market for payment services will look in the future and how overall cost efficiency can be improved even further.”

The study finds that cash payments account for nearly half of the total costs. As the most commonly used payment instrument, cash has, on average, the lowest social costs per transaction, at €0,42, closely followed by debit cards with costs of €0,70 to society.

The Federal Reserve Bank of Kansas City has released a new paper entitled "New Person-to-Person Payment Methods: Have Checks Met Their Match?".

Compared with person-to-person payments via cash or checks, new methods now available to consumers offer significant advantages but still leave gaps in service, suggesting a role the Federal Reserve could play to facilitate innovation in this area.

The full paper is available here.

The Federal Deposit Insurance Corporation (FDIC) has announced the results of its 2011 National Survey of Unbanked and Underbanked Households. "The survey indicates that more than one in four U.S. households (28.3%) are either unbanked or underbanked, a slight increase from the findings of the FDIC’s 2009 inaugural survey. The survey, conducted every two years by the FDIC in partnership with the U.S. Bureau of the Census, provides the banking industry and policy makers with insights and guidance on the demographics and needs of the unbanked and underbanked."

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "total consumer credit decreased at a seasonally adjusted annual rate of 1.5%. Revolving credit decreased at an annual rate 6.75%, and nonrevolving credit increased at an annnual rate of 1.0%."

A great friend of Glenbrook’s is Broox Peterson, formerly Senior Vice President and Assistant General Counsel at Visa International and currently in private practice. In 2006, Broox wrote a great article that we shared on Payments News about regulatory implications that entrepreneurs may want to consider when building a new payments company - something that, in our experience, entrepreneurs do not always fully understand or appreciate. He’s just updated that article to reflect some recent changes – and we’re delighted to be able to share the updated version on Payments Views!

The Payment Cards Center of the Federal Reserve Bank of Philadelphia has published a discussion paper by Stephanie M. Wilshusen, Robert M. Hunt, and James van Opstal of the Payment Cards Center and Rachel Schneider of the Center for Financial Services Innovation (CFSI).

The Payment Cards Center and CFSI conducted this research project to develop a better understanding of how consumers use prepaid cards by examining their transaction behavior and the issuer revenue and cardholder costs generated by those transactions. Using data provided by Meta Payment Systems, this study focuses on open-loop reloadable prepaid cards and presents an analysis of more than 280 million transactions made on more than 3 million prepaid cards issued by Meta Payment Systems over a six-year period in over a dozen programs.

The US Federal Reserve has reported its latest G.19 Consumer Credit statistics - finding that "consumer credit increased at a seasonally adjusted annual rate of 5% in the second quarter. Revolving credit decreased at an annual rate of 0.5%, while nonrevolving credit increased 7.75%. In June, consumer credit increased at an annual rate of 3%."

The Federal Reserve Board recently announced the approval of a final rule that amends the provisions in Regulation II (Debit Card Interchange Fees and Routing) that permit a debit card issuer subject to the interchange fee standards to receive a fraud-prevention adjustment. The final rule revises provisions that are currently in effect as an interim final rule -- holding the adjustment at no more than 1 cent, but simplifying the elements required to be included in an issuer's fraud-prevention policies and procedures.

On the web:

• Bill Me Later Helps eBay's Profits But Exposes It To Risk - San Jose Mercury News
• Payment Startups Struggle with California Money Transmitter Law - Business Insider
• Square Issues Cease And Desist To mPowa: Hands Off Our Hands Picture - TechCrunch
• Rocket May Clone Stripe To Beef Up Payments Portfolio - GigaOM

On the wires:

• CashStar Raises $5 Million in Funding
• VeriFone Wins $35 Million-Plus Contract for District of Columbia Taxi Systems

The Federal Reserve Bank of Kansas City's Payments System Research Department has recently published a Research Brief by Fumiko Hayashi entitled "Discounts and Surcharges: Implications for Consumer Payment Choice".

This article reviews the current landscape for payment discounts and surcharges, considers whether they influence consumer payment choice, and offers several policy responses.