#Americans #prefer paying with EMV #chip #cards to #swiping their cards or even paying with cash, according to a recent survey from financial #technology solutions provider Fiserv. According to the report, released last week, 36% of the people surveyed said they preferred EMV chip cards to other #payment methods. The reason, according to the report, […]
Bank Innovation
#Mobile #payment providers should focus on the simple things, not only beating their competitors, when it comes to #innovation—at least according to #Fiserv, who noted as much in a recent white paper. Consumers want friction reduced in their daily tasks, like buying a cup of coffee or withdrawing cash, Fiserv noted in its ‘Four Pillars […]
Bank Innovation
Over the last several years, the payments ecosystem has experienced a surge of new entrants that seek to capitalize on the continued shift to electronic payments. Most are non-traditional financial services #providers (such as fintechs, #payment specialists, consumer product companies and media firms), introducing innovative products and services to enhance existing payment processes, address underserved areas or improve customer experiences. However, many of these entrants have faced challenges implementing solutions in the US due to the need to rely on third-party partnerships to bring their offerings to market.
In the US, card network rules require an entity to be a financial institution and have FDIC insurance to become a principal member and issue general purpose payment #cards. These rules have presented challenges for some payment providers in quickly launching card-based products. The investment and scale needed to be a self-issuer in the US are significant and partnering with traditional financial institutions can add additional infrastructure, regulations, compliance oversight and costs.
In Europe, however, the Financial Conduct Authority has made it #easier for non-traditional financial services providers to self-issue products and services by offering e-money licenses. E-money licenses provide a “bank lite” charter that allows companies to store monetary value electronically; customers can then use their stored electronic funds to make payments without necessarily involving a bank account. In parallel, the payment networks have granted full principal membership to companies holding e-money licenses, enabling them to issue physical cards tied to e-money funds. As a result, several companies have obtained both e-money licenses and principal network membership to eliminate the reliance on third-party partnerships, reduce costs and increase speed to market. Recent examples include FairFX, WEX and Facebook (Figure 1).
While this strategy is relatively recent, the implications are far-reaching. With less regulatory burden and compliance oversight, the barrier to enter the payment ecosystem is significantly lower. Many of the companies exploring e-money #strategies are more agile than traditional financial institutions, and their reliance on partnerships will no longer impede their speed to market.
The creation of e-money licenses coupled with principal network membership may be advantageous for card networks. The model expands the number of network participants and potential payments volume, while providing consumers and businesses with enhanced products and services not offered by legacy players. There are risks associated with expanding the base of market participants, however, and data security is a primary concern. Protecting cardholder data is paramount given the systemic and business risks involved. Traditional financial institutions invest significant resources to maintain necessary information/data security policies and procedures; the security standards for companies with e-money licenses may not always be as robust, as illustrated by some notable public examples.
It’s unclear whether the US will follow Europe and make it easier for non-traditional payment providers to self-issue cards. Fintechs have been eager to obtain bank charters as a means of offering a broader scope of products and services directly to consumers and businesses without reliance on third parties. The U.S. Office of the Controller of the Currency and FDIC continue to evaluate requests but have yet to approve applications.4 However, banking regulators of seven US states have agreed to simplify the way #fintech companies can apply for licenses in a bid to make it easier for businesses to offer their services nationwide.5 Key to all of these trends will be balancing promotion of payments innovation for consumers and businesses with ensuring continued safety and soundness for the payments systems.
1Finextra.com, FairFX gains e-money licence through acquisition of Q Money, 1/20/2017
2Wex Press Release, WEX Virtual Payments Secures E-Money License and Becomes Principal Member of Mastercard in Europe, 8/30/2017
3TechCrunch, Facebook just secured an e-money license in Ireland, paving the way for Messenger payments in Europe, 12/7/2016
4Reuters, U.S. banking regulator not ready for fintech charter applications, 9/13/2017
5The Wall Street Journal, Seven States Team Up on Fintech Licenses, 2/6/2018
The post E-money strategies make it easier for novel payment providers to self-issue cards appeared first on Accenture Banking Blog.
True, mobile payments are becoming increasingly popular as a form of P2C #payment methods, but make no mistake – cards are not going anywhere anytime soon. At least, that’s according to RBR’s latest report. According to RBR’s Global Payment Cards Data and Forecasts to #2022, report, the number of #card-accepting merchant outlets rose by 7 million …Read More
Bank Innovation
EXCLUSIVE – My colleague JJ Hornblass recently commented on the ACH #fraud that took place at our company, and how one of its most striking aspects was the casual way in which the bank reacted to it. This casualness may be due to ACH fraud not being anything new to the industry. What is new …Read More
Bank Innovation
An unknown hacker or #hackers #stole $ 6 million #from a #Russian #bank in 2017 #through the #SWIFT international payments #system, the Russian #central bank said according a report by Reuters today. The Central Bank of #Russia said that it had received information about “one successful attack on the work place of a SWIFT system operator” […]
Bank Innovation
EXCLUSIVE – SME #accounting #firm #Xero has partnered with payments platform #Stripe to allow its 1.2 million users to receive Automated Clearing House (ACH) bank transfers. In a statement emailed to Bank Innovation, Xero, Chief #Technology Officer, Craig Walker, stated: Our ultimate goal at Xero is to make sure small businesses are getting paid as […]
Bank Innovation
EXCLUSIVE— The march of mobile banking and payments continues across the U.S., but it may be smarter for those startups looking to break into that market to look at other regions, Eric Wiesen, general partner for Bullpen Capital, told Bank Innovation. “In the U.S., my guess is that mobile payments will continue to grow perfectly […]
Bank Innovation
EXCLUSIVE – There’s an argument made in favor of keeping plastic cards and online shopping, but Swedish #payment company #Klarna is not on that side, based on its recent effort to rid customers of the need to use their cards online. Klarna partnered yesterday with payments #technology provider ACI Worldwide to bring this feature to […]
Bank Innovation
The People’s #Bank of China (PBOC) will require #payment platforms to allocate as much as 50% of their total client funds in a regulated interest-free reserve. Additionally, the PBOC also said it would regulate QR code payment to reduce growing concerns about risks related to these types of transactions. The new regulations will have an […]
Bank Innovation
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