Welcome to the Feb. Innovating Payments Executive Summary. In this month’s issue, Federal Reserve Governor Michelle W. Bowman addressed the future of banking in her comments to the 157th Assembly for Bank Directors, Southwestern Graduate School of Banking in Maui, Hawaii. In them, she reminded bankers that the risk of complacency is a vulnerability they must address in their organizations. Federal banking regulatory agencies are also seeking comments on interagency efforts to reduce the regulatory burden on financial institutions.
Meanwhile, Jessica Washington, AAP, assistant vice president of the Retail Payments Risk Forum at the Atlanta Fed, warned financial institutions about credit-push fraud. She stated, “These credit-push scams, called authorized push payment fraud, deserve a shift in our curriculum, mitigation techniques, and approach to consumer protection.” Finally, as reported by Newsweek, Manhattan District Attorney Alvin Bragg, Jr., has sent scathing letters to the CEOs of Venmo, Zelle, and Cash App, following a series of fraudulent scams, demanding immediate action to protect consumers.”
Read on to learn more.
The Federal Reserve
The future of banking
Federal Reserve Governor Michelle W. Bowman discussed the future of banking during her comments to the 157th Assembly for Bank Directors, Southwestern Graduate School of Banking, Maui, Hawaii, saying:
We find ourselves at an interesting juncture in the evolution of the banking system. Some traditional risks—like interest rate risk and liquidity risk—have become a higher priority concern for banks and regulators, while other risks—like cybersecurity and fraud—continue to evolve and pose challenges. And of course, banking regulation and proposed reforms exert pressure on important elements of the banking system, affecting both the size and activities of banks. At the same time, I see important opportunities—and a critical need—for banks to continue supporting their communities and to find new and innovative ways to deliver financial products and services.
Bowman also talked about the “risk of complacency,” reminding bankers that false assumptions contribute to complacency and that “familiar risks emerge in new ways.” She went on to point out, “Even with a relentless focus on the known risks that affect the banking system—credit risk, interest rate risk, liquidity risk, cyber risk, and others—we also know that as the banking system evolves, the risks evolve as well.”
For more on Bowman’s comments, click here.
Federal bank regulatory agencies are seeking comment on interagency efforts to reduce the regulatory burden.
According to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), the OCC, Board, and FDIC (collectively, the agencies) are reviewing agency regulations to identify outdated or otherwise unnecessary regulatory requirements on insured depository institutions and their holding companies. The agencies divided their regulations into twelve categories.
Over the next two years, the agencies will publish four Federal Register documents requesting comment on multiple categories. The first Federal Register document requests comment on regulations concerning the following three categories: Applications and Reporting, Powers and Activities, and International Operations.
Please provide written comments by May 6, 2024.
For more information or to provide comments, click here.
Fraud
The cold reality of payments push fraud
In a Jan. 29 blog post, the Federal Reserve Bank of Atlanta reminds readers of what they call "the cold reality of payments push fraud." It says,
The proliferation of person-to-person payment apps and services has led to a huge increase in credit-push payment volume. What's more, instant payments have arrived in the United States, and over the next decade, these credit-push payments will account for a significant share of payments volume. Fraudsters are flocking to find one more human being to trick in a new and massive opportunity.
Problems arise, because UCC 4A doesn't apply to consumer payments, and Reg. E can be difficult to interpret, especially since its was written to apply to debit-pull payments.
The blog concludes with this reminder: “These credit-push scams, called authorized push payment fraud, deserve a shift in our curriculum, mitigation techniques, and approach to consumer protection.”
Faster payment fraud trends and mitigation opportunities
In other news, the Faster Payments Council (FPC) Fraud Work Group recently released its first Bulletin aimed at "fostering safer user experiences and bolstering confidence and trust in faster payments." In it, the FPC identifies gaps in mitigating faster payments fraud that include potential opportunities for improvement.
The primary gaps, drawn from the Bulletin, include differing payment provider processes and technology and limited information sharing. Each gap includes multiple sub-bullets summarizing the potential opportunities and steps financial institutions can take to improve.
The Bulletin concludes:
Together, we can reduce faster payments fraud to consistently low levels with actions such as the following:
- Collaborate to develop and adopt common fraud prevention processes and technology.
- Improve information-sharing practices, such as sharing the FPC Fraud Work Group bulletins.
- Participate in industry-wide efforts to prevent, detect, and mitigate faster payments fraud.
To read the Bulletin in its entirety, click here.
Zelle, Venmo, Cash App
As reported by Newsweek on Jan. 23, Manhattan District Attorney Alvin Bragg, Jr., has sent scathing letters to the CEOs of Venmo, Cash App, and Zelle, demanding immediate action to protect consumers after a surge in fraud that drained bank accounts.
In the letters, Bragg said fraudsters gained access to unlocked devices, stealing significant sums of money and using the financial information from the app to open new accounts. Despite the companies’ assurances that the apps were safe, thefts continue to rise.
“Bragg offered the fintech companies a solution, recommending a series of measures, including multi-factor authentication,” the article said. “He also suggested imposing default lower limits on daily monetary transfers and requiring wait times and secondary verification for large transactions, giving users time to identify and cancel unauthorized activities.”
Despite requests to meet with the CEOs of Zelle, Venmo, and Cash App, he has yet to receive a response.
To read this article in its entirety, click here.
NEACH
NEACH U enables you to learn online from payments experts
With all the changes, challenges, and opportunities the payments industry offers, practical knowledge and understanding are needed now more than ever. Whether you're looking to build proficiency in payment-related functions, implement strategic changes in your organization, develop leadership skills, or learn how to lead and grow payments teams for the future, NEACH U is specifically designed to provide payments professionals with the tools and knowledge they need to help maximize their impact.
To learn more about NEACH U’s eleven certificate programs spanning various facets of the payments industry, click here.
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AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.
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