Technology & Payments

Dec. 2, 2022: Technology & Payments Articles


Shoppers Go Deep on BNPL and eCommerce as Holiday Shopping Ramps Up

Driven by an inflation-fueled demand for deals, the official kick-off weekend of the 2022 shopping season outperformed events of the past two years albeit with a new bias for more point-of-sale credit and financing and increased reliance on digital channels than ever before.

A survey of nearly 3,100 consumers found that almost one-third of shoppers used credit cards, point-of-sale loans or installment plans to pay for their Black Friday buys this year. Those who turned to these options “used them to finance at least half of their Black Friday purchases. This shows how drastically soaring prices have impacted consumers’ shopping experiences,” per the report.

That includes 45% of paycheck-to-paycheck consumers who leaned heavily on credit and financing to get Black Friday deals, paying for nearly 60% of their purchases in these ways.

Related Reading: The Big Winner of the Holiday Shopping Season So Far: Buy Now, Pay Later

Related Reading: More Americans Tapping Buy Now, Pay Later for Holiday Gifts Shows ‘How Stressed the Economy Is,’ Harvard Researcher Says


Mastercard, Square, Equifax, Wise…Big Names Back New Canadian Fintech Association

Courtesy of FinExtra

Mastercard, Square and Wise are among the members of a new not-for-profit group pushing for a “whole-of-government” approach to supporting Canada’s fintech ecosystem. Fintechs Canada says it will work with policymakers to push for competition and innovation in a country dominated by a handful of giant banks.

The association launches with more than 40 members, including fintechs such as WealthSimple and Coinsmart, and “fintech friendly” FS players like Interac and Equifax. Among the areas that the new group will focus on are payments modernisation, open banking, the digitalisation of money, and AML and terrorist financing law. Canada is in the midst of a major multi-year payments infrastructure overhaul and has also begun slowly consulting on bringing in an open banking framework. Read More


Mind The Gap: How Lenders Can Open the Doors for The Credit Invisible

Courtesy of Nidhi Verma, Fintech Nexus News

Being “credit visible” presents life-changing benefits for consumers across all life stages. For millions, credit inclusion allows for economic advancement and upward mobility. So why are there still people who are credit invisible? One of the most common reasons unserved and underserved consumers cited is the high cost of credit. High interest rates limit credit options among credit disadvantaged consumers, making it imperative for banks, credit unions, and new market entrants to design more affordable and feasible ways to access credit.

Credit awareness, education, and better access will also allow consumers to understand what it means to build and improve their credit profiles and why it is essential to be engaged in the credit system. Lenders striving for growth targets can focus on these niche target segments by identifying and serving an existing portfolio of credit-underserved consumers. Read More


Mobile Checkout Brings Ease of eCommerce Payments into Stores

Courtesy of PYMNTS.com

Payments innovators are pushing past omnichannel retailing to meld POS-capable channels tied to databases. It’s a unified commerce approach that brings capabilities like checkout anywhere on the sales floor.

By creating digital environments in physical retail spaces, new customer interactions are enabled that not only allow consumers to skip the line, but also improve customer experience and ultimately increase sales for merchants.

“Customers now expect a seamless experience across all the merchant’s touch points,” Petur Sigurdsson, product director at LS Retail, an Aptos Company,  told PYMNTS. “The concept of unified commerce is really of essence here.” Read More

Related Reading: Customers Want Security and Ease of Use in Their Digital Payment Methods

 


Nov. 18, 2022: Technology & Payments Articles

FIs Embrace Biometric Payment Cards To Improve Security, Enhance User Experience

Last month, biometric payment cards that incorporate fingerprint scanners received a significant boost thanks to the publication of new specifications by EMVCo, the global card standards-setting body owned by Mastercard, Visa, American Express, Discover, JCB and UnionPay.

Among other things, the new EMV Contactless Kernel Specification is intended to accelerate the evolution of biometric authentication for contactless card payments, setting the stage for widespread adoption of the technology. The concept of fingerprint payment authentication first hit the mainstream to verify identity for mobile-based eCommerce transactions.

Once the technology became a standard feature of most smartphones, it was only a matter of time before biometric mobile payments kicked off. For example, PayPal first rolled out limited fingerprint authentication in 2014, followed by a more extensive launch in 2017. Since then, fingerprint-based payment authentication has evolved into biometric payment cards incorporating a fingerprint scanner into the card, enabling cardholders to make secure contactless payments without reaching for their phones. READ MORE


Wells Fargo Starts Small-Dollar Loans Amid Overdraft Scrutiny

Wells Fargo & Co introduced small-dollar loans to customers online, the bank said Wednesday, as overdraft fees draw greater scrutiny in the United States.

The loans are for $250 or $500 with a flat fee of $12 or $20, respectively, to eligible customers, the bank said. The loans are already available in a limited number of markets and will be offered nationwide by year-end.

The Biden administration has pledged to crack down on so-called surprise “junk fees” such as overdrafts that can catch customers off guard. Some major banks have responded by scrapping overdrafts altogether, reducing charges or changing policies to allow customers to opt in or out of the services.


Google to Pay $391.5 Million in Location Tracking Settlement with 40 States

Google has agreed to a $391.5 million settlement with 40 state attorneys general over its location tracking practices. The settlement outlines that Google misled its users into thinking they had turned off location tracking even as the company continued to collect their location information. The investigation, which marks the largest attorney general-led consumer privacy settlement ever, was co-led by Oregon and Washington.

“For years, Google has prioritized profit over their users’ privacy,” said Oregon Attorney General Ellen Rosenblum in a news release. “They have been crafty and deceptive. Consumers thought they had turned off their location tracking features on Google, but the company continued to secretly record their movements and use that information for advertisers.”

Google said in a statement that it has already addressed and corrected some of the location tracking practices detailed in the settlement. READ MORE


Bank Monetization of APIs Represents a “Billions-per-Year” Opportunity

Rather than viewing the development of APIs as a regulatory cost burden, banks should strive to realize the considerable monetization opportunities afforded by the trend, according to a new report from the Mobey Forum’s Open Banking Expert Group. Based on a year-long research study, the report leverages the expertise of open banking experts across leading Tier One banks and global institutions.

The group determined that significant monetization opportunities exist beyond those initially expected and, most notably, many of these opportunities are for ‘internally facing’ use cases, which present lower risk and higher return. According to the report, the simplest business case for banks is through direct monetization of so-called Premium APIs, which involves charging third parties for access and use of a bank’s APIs beyond the standard free offerings required by, for example, compliance to the EU’s PSD2 regulation.

The research found that this type of direct, external-facing monetization can enable banks to recover the cost of creating and publishing core compliance APIs, and that increasing the number of products available via APIs, together with offering enhanced performance levels, generates significant monetization opportunities. READ MORE


Analysis: U.S. Banks to Pounce on Fintech Deals as Valuations Plunge

 Financial technology companies, long seen as a threat by the likes of JPMorgan Chase & Co (JPM.N), are increasingly becoming acquisition targets for traditional U.S. banks as rising interest rates and falling valuations crimp their expansion.

The valuations of listed financial technology firms have plunged 70% in 2022, analysts at Jefferies Group said in a note last week. In the same period, the valuations of banks in the S&P 500 are down 33%, while valuations for the S&P 500 (.SPX) are down 23%, according to data from Refinitiv IBES.

The decline presents an opportunity for Main Street banks to buy companies and beef up their technology for digital banking, online payments and other financial services and diversify beyond lending. READ MORE


US Treasury Calls for Closer Supervision of Fintech-Bank Relationships

The US Department of the Treasury has called for greater regulation of fintech-bank partnerships in order to prevent abuses and protect consumers.

As concentration among federally insured banking is growing, fintech players are making a play in core consumer finance markets – deposits, payments and credit – contributing to competitive pressure, says a new Treasury report.

While these non-bank entrants are contributing to more choice, better services and lower prices for Americans, they are not subject to the same oversight as traditional banks.

However, because the established players are often vital to the underlying infrastructure that supports the new business models of fintechs, there is a lot of interaction between the two camps – both as competitors but also collaborators. The report recommends a series of steps to deal with the tangled relationships between banks and fintechs. READ MORE

 

Nov. 11, 2022: Technology & Payments

Would A Fintech Super App Make It in America?

During the last fintech bull run, no phrase was thrown around with more weight or treated with as much caution as “super app.” Known in Chinese tech markets as an entire lifestyle all under one icon, super apps like Alipay and WeChat offer everything from rideshare and grocery shopping to complex consumer financial products.

The question has since been: can a super app develop in America? Four fintech experts sat down at the standing-room-only Build Bold stage at Money 20/20 to find out. They examined super apps like biologists examining a type of mycelial fungus, describing its conditions for growth as a species and what environmental niche it evolved to fill.


‘Pay By Bank’ Trend Is Next Front in Merchants vs. Banks Payments War

A pay-by-bank strategy will take off at U.S. retailers in 2023. To counter the revenue hit, banks and credit unions must plan ahead. Experts suggest a preemptive strike that hinges on aggressive promotion of debit cards — to court inflation-shocked consumers who increasingly resist credit cards.

A growing number of small U.S. retailers have been encouraging shoppers to try an alternative to credit cards called “pay by bank,” and payments experts predict this option will take off in a much bigger way in 2023. The trouble for banks and credit unions is that pay by bank translates into a revenue hit, as it allows merchants to avoid the so-called “swipe” fees that come from card use.


JP Morgan and Mastercard unveil Pay-by-Bank Service

JP Morgan is teaming up with Mastercard on a service that uses open banking to let customers make payments using their bank account information instead of a card. The Pay-by-Bank service offers ACH payments that use open banking so that customers can permission their financial data to be shared between trusted parties to let them pay bills directly from their bank account.

This means that customers do not need to type in routing and account numbers each time they need to pay a bill. For billers and merchants, it automates consumer onboarding and reduces the risk and cost of storing bank account information. JP Morgan says the offering will be particularly beneficial for recurring payments.


New York Fed Tests Wholesale CBDC for Cross-Border Payments

The Federal Reserve Bank of New York has developed a wholesale CBDC prototype for an experiment on cross-border digital currency transactions supported by blockchain technology. The inaugural project of the New York Fed’s new innovation centre, Project Cedar is a research effort to develop a technical framework for a theoretical wholesale CBDC.

The first phase of the project simulated a foreign exchange spot trade and introduced a wholesale CBDC prototype to test whether using blockchain technology could improve speed, cost, and access to cross-border wholesale payments. The experiment found that payments could be settled in under 15 seconds and that the simulated ledger network enabled atomic settlement, meaning both sides of the transactions were settled either simultaneously or not at all – slashing risks.


Payments Experts Say Embedded Finance Still in Early Innings

Say the term “embedded payments,” and thoughts typically wander to the consumer side of commerce to such things as the invisible transactions in the background of an Uber ride or the one-click retail checkout on a phone.

But as Galileo CPO David Feuer, Entrata CFO Mark Hansen, and Global Rewards CEO Isaac Itzkowitz noted during a recent On the Agenda roundtable, we’re seeing a major surge of embedded payments in the commercial realm too.

“It’s early innings in this digital transformation,” Hansen said. Right now, the modernization of B2B payments takes a cue from the Apple Pays and the Google Pays and through any number of apps. That’s a goal, perhaps, where we’re used to seeing our banking and transaction information at the ready, and on demand.

RELATED READING: ‘Inevitable’ Advance of Embedded Payments Will Spark Bank-FinTech Partnerships
Embedded payments are an inevitability for merchants, for small businesses, for plumbers and gardeners, and pretty much everyone else. Through the past several decades, going back to the dawn of the internet, commerce was centered on small retail purchases. With the early successes of the platforms, ranging from Amazon to Expedia to Netflix, the challenge was how to accept a credit card transaction online. Moving Beyond the Check and Away From the Bank Branch: But the emergence of APIs and software has leveled the playing field a bit and can help smaller businesses that traditionally relied on paper checks and invoices move more fully online.


Across the Pond: FCA Warns of Jail Time for BNPL Bosses Over Financial Promotions

The UK’s Financial Conduct Authority (FCA) is warning BNPL bosses that they could face jail time if they do not stick to stringent financial promotion rules. Over the summer, the UK government set out the first plans for new rules governing the fast-growing but controversial BNPL sector.

However, while the legislation inches towards completion, the FCA has taken proactive steps to use existing powers to bring firms into line. In August, the regulator publicly warned against promoting unapproved BNPL products. Now, in a letter first reported by City AM, it has written to several providers and to retailer to follow up.

The letter says that any communication or so-called explainers on BNPL products constitute “financial promotions” – meaning that they fall within the regulator’s jurisdiction. Promotions that are not “clear, fair and not misleading” could result in up to two years in prison.


Many of the Top CUs Are Struggling with Digital Services

Based on an analysis of the Top 100 credit unions, the average user experience score comes in at 2.31 out of 5.

An independent group of UX, Design, Content and Analytics professionals conducted a “digital experiences” review of the Top 100 credit union by asset size – and they found “many credit unions are not investing in the digital capabilities that meet current and prospective members’ wants and/or needs.”

The panel of experts were asked to focus on the following categories to rate the Top 100 credit unions: User Experience; Analytics and SEO; Key Features and Functionality; Visual Design and Branding; Content; Digital Marketing; and Security and Privacy.

The experts rated each credit union on a scoring level from 0 (poor) to 5 (most innovative). According to the report, “the average user experience score was 2.31 out of 5, indicating that many credit unions are failing to bring their high-touch approach to digital channels and successfully convert what has traditionally been a transactional environment into a relational one.”

 

Nov. 4, 2022: Technology & Payments

Ditching Passwords Could Unlock a $59 Billion Biometrics Market

Consumers prefer a user experience that is both convenient and secure, even though 68% said they would choose security over convenience. A consistent authentication experience across multiple platforms also creates trust. As businesses look to create more secure and convenient authentication experiences, advanced identity authentication through technology such as biometrics could help meet security and convenience expectations.

Consumers already understand the shortcomings of password authentication, and that is feeding demand for better authentication solutions. Being able to log in without a password was rated just as highly by almost half of respondents as having more detailed information about transaction security, and 61% expressed interest in password alternatives, a share that jumps to 68% among mobile app users.

This edition of the “Digital Identity Tracker®” explores consumer attitudes toward identity authentication and the possibilities offered by forgoing passwords in favor of technologies such as biometrics and passkey. READ MORE


Fintech using behavioral science to monitor consumer debt

For consumers struggling with credit card debt at a time when inflation is driving up prices, one Michigan company is working to help their bank or credit union empower them to break the cycle.

Nickels, a financial technology company in Ann Arbor, Michigan, works with financial institutions through its Credit Card Coach platform — an application that analyzes anonymized data from checking accounts other sources to help improve the financial health of members through tailored services and marketing efforts while offering account holders personalized advice for managing payments and tackling credit card debt.  READ MORE


CFPB seeks further public input on big tech payment platforms

In October 2021, the CFPB ordered six large technology and peer-to-peer platforms that operate payment services (Amazon, Apple, Facebook, Google, PayPal and Square) to provide information about their business practices, including their data collection and use, their policies for removing individuals or businesses from their platforms, and their policies and practices for adhering to key consumer protections like addressing disputes and errors. Now, the CFPB is announcing that it will re-open the public comment period for 30 days and add additional questions.

Faster payment systems are increasingly popular and offer many benefits to consumers, like sending money directly to other consumers or engaging in quicker transactions. But the scale and market power of large technology companies raise concerns about potential new risks to consumers and to broader competition in the marketplace. The CFPB continues to analyze the responses to the October 2021 orders and public comments and to share our insights with the public. For example, in August, the CFPB released a report The Convergence of Payments and Commerce, that outlined consumer risks stemming from financial services companies’ ability to aggregate and monetize consumer financial data. READ MORE


FedNow set to roll out payments highway

In about six to eight months, FedNow will launch a country-wide interstate highway for payments that will change the financial landscape, Fed Reserve Governor Christopher Waller said on Oct. 25.

He said anyone in payments or fintech needs to get ready for 24/7, 365 settlement; the government will provide the infrastructure, and the private industry needs to build on top and fast.

“The FedNow structure will be online up running sometime between May and June of 2023; once we get that up and running, we should have full reach across the country in real-time payments through either RTP or the Fed House service,” Waller said.

“The critical thing is if you’re a bank, or you’re a fintech working with a bank, and you to want access, you need to talk to your payments processor, or directly to the Fed, and get hooked up and get going.” READ MORE


Synctera launches first BaaS line of credit

Synctera announced the first Baas industry line of credit product. Synctera is a San Francisco-based startup that helps companies build embedded financial products.

The new product enables fintech developers and established companies to quickly create lending products or embed lending services into existing offerings. CEO Peter Hazlehurst said forward-thinking companies must evolve by offering standalone embedded products.

“Consumers’ credit-related needs and preferences continue to evolve, and millions of Americans lack real access to credit,” he said. “As we work towards our vision of unlocking human potential through financial innovation, we are excited to see the impact Synctera Line of Credit can make for under-resourced consumers.” READ MORE


Federal Reserve Board announces pricing, effective January 3, 2023, for payment services the Federal Reserve Banks provide to depository institutions, such as the clearing of checks, ACH transactions, and wholesale payment and settlement services

The Federal Reserve Board announced pricing, effective January 3, 2023, for payment services the Federal Reserve Banks provide to depository institutions, such as the clearing of checks, ACH transactions, and wholesale payment and settlement services.

By law, the Federal Reserve must establish fees to recover the costs of providing payment services over the long run. The Reserve Banks expect to fully recover 100.2 percent of actual and imputed expenses in 2023, including the return on equity that would have been earned if a private-sector firm provided the services. Overall, the Reserve Banks estimate that the price changes for 2023 will result in a 2.9 percent average price increase.

The Board also announced the 2023 pricing for the FedNowSMService, a real-time payments platform, which is targeted to launch between May and July next year. The pricing is substantially similar to the anticipated pricing announced on January 27, 2022. READ MORE