Welcome to the March 2024 Innovating Payments Executive Summary. In this issue, the Federal Reserve announced that its FedNow® Service reached 500+ participating financial institutions. Meanwhile, OCC Head Michael Hsu expressed concern about FI/FinTech partnerships, saying that if FinTechs continue to expand their services without proper oversight, it could undermine public confidence, while the CFPB may be taking legal action against Block (CashApp). Also in this month’s issue, Google is retiring its Google Pay app in the U.S., effective June 4.
Read on for more on these and other stories.
Top Headlines
FedNow
In a LinkedIn blog post, the Federal Reserve announced that the “FedNow® Service reached a new milestone: 500+ participating financial institutions. Strong network growth enables widespread access to instant payments for businesses and consumers across the country.”
It is remarkable that the FedNow Service, at seven months old, has garnered more than 500 participants. As it continues to grow, key milestones we look forward to following include volume and value reports, specific use cases enablement, the growth of the RfP Message, and any federal government adoption. NEACH will continue to follow and report on developments.
Click here to view a list of participating financial institutions currently live on the service, financial institutions serving as settlement and liquidity providers, and certified service providers.
OCC Head Concerned about Bank-FinTech Collaboration
Michael Hsu, CEO and acting comptroller of the currency for the Office of the Comptroller of the Currency (OCC), recently reiterated his agency’s commitment to mitigating any perceived risks in banking — especially those triggered by collaborations with FinTechs, reported PYMNTS on Feb. 26.
Speaking on Feb. 21 at Vanderbilt University, Hsu stated: “Arguably, some FinTechs are …. blurring the line between banks and nonbanks (and raising concerns about level playing fields). There are FinTechs, he said, that “started off simply facilitating payments,” but now “offer customers the ability to deposit paychecks directly into their accounts, earn yield on the cash held there, and access credit, all with a few clicks of a mouse or taps on a phone.”
PYMNTS states, "Hsu fears that if FinTechs continue to expand their services without proper oversight, it could undermine public confidence."
As noted in the Feb. 21 transcript, Hsu points out, “From a financial stability perspective, the deposit-taking-like activity warrants the most scrutiny because of the vulnerability it creates to runs. Any entity managing money on behalf of customers can face a run if those customers have doubts about the safety of their money.”
His concerns speak to those relationships where a FinTech has become a direct competitor to financial institutions, not an enabler. FI/FinTech partnerships often facilitate new opportunities for consumers and businesses.
As noted in the article, “PYMNTS Intelligence found that 89% of bank executives believe partnering with FinTechs is at least “somewhat important” and at least 6 out of 10 financial institutions (FIs) are already doing so.”
With that in mind, partnerships between financial institutions and FinTechs will likely continue well into the future.
CFPB May Take Legal Action Against Block (Cash App)
“The Consumer Financial Protection Bureau has informed digital payments company Block that the bureau may take “legal action” against the company related to a probe of the company’s peer-to-peer payment unit Cash App,” Payments Dive reported.
It states:
The Financial Crimes Enforcement Network is exploring whistleblower allegations that Cash App and companies it works with to process transactions conducted inadequate due diligence on Cash App customers, NBC News reported last week. Those flaws potentially left the door open to illegal activities such as money laundering and terrorism financing, whistleblowers said, according to the media network.
According to the CFPB:
- In 2020, 50 percent of complaints to the CFPB regarding P2P were related to fraud.
- In 2021, the Federal Trade Commission (FTC) received nearly 70,000 complaints from consumers who sent money to fraudsters via payment apps or similar services, totaling $130 million in losses.
The CFPB and FTC continue to follow fraudulent complaints and concerns against major P2P players, including CashApp, PayPal, Venmo, and Zelle.
Google Pay App to be Retired in U.S. This Year
“To simplify the app experience, the U.S. version of the standalone Google Pay app will no longer be available for use starting June 4, 2024,” the tech giant said in a Feb. 22 blog post. “You can continue to access the most popular features — tapping to pay in stores and managing payment methods — right from Google Wallet, which is used five times more than the Google Pay app in the U.S.”
The post says, "As of June 4, 2024, you will no longer be able to send, request or receive money from others through the U.S. version of the Google Pay app.”
Google says they will continue making payments as fast and seamless as possible. For example, the company has plans to improve "Google Pay autofill in Chrome, making it easy to pay for public transit and expanding the types of passes you can store in Wallet."
The company says it will continue to improve payments experiences like these.
Nacha
Nacha Launches New Campaign Highlighting the Many People Benefiting from Direct Deposit
On Feb. 28, Nacha announced the launch of a new campaign featuring people benefiting from Direct Deposit. “With a spotlight on real people—not actors—the campaign showcases how Direct Deposit helps Americans seamlessly receive not only their wages but many other types of payments as well,” the news release stated.
“From tax refunds and insurance claims to veterans’ benefits and saving for the future, Direct Deposit offers safety, ease and convenience,” said Jane Larimer, Nacha President and CEO in the release. “This campaign shines a light on how Direct Deposit is working for people far beyond delivering their pay.
Among those profiled is Christopher who served in the Navy and is among the 97% of veterans receiving their benefits by Direct Deposit, noted the release. “It’s nice to know they’ll just arrive, so I can focus on the things that really matter,” said Christopher.
Ralph, a communications professional, relies on Direct Deposit to receive pet insurance claim reimbursements for his dogs, including Walter. “It’s great having one less thing to worry about with a rambunctious puppy like Walter,” said Ralph.
To learn more about Direct Deposit, visit the campaign website at https://directdeposit.org/.
ACH Network Records Strong Growth in 2023 as Same Day ACH Surpasses 3 Billion Payments Since Inception
Led by strong growth in Same Day ACH and business-to-business (B2B) payments, the ACH Network securely handled 31.5 billion payments valued at $80.1 trillion in 2023, reported Nacha in a news release. Payment volume for the year was up 4.8% from 2022, while payment value grew 4.4%. 2023 marked the 11th consecutive year in which ACH Network value has increased by more than $1 trillion.
Same Day ACH volume increased 22.3% and 41.2% in value, to 853.4 million payments worth $2.4 trillion. Since its inception in September 2016, Same Day ACH volume has surpassed 3 billion payments and $6 trillion.
“The results speak loud and clear: Payments system users are embracing Same Day ACH,” said Jane Larimer, Nacha President and CEO in the release. “Same Day ACH is helping meet the nation’s faster payments needs, with uses from payroll to insurance claims, account transfers and more, a $1 million per payment limit and three daily settlements.”
To view the complete ACH Network value and volume, download the infographic.
Miscellaneous
These are the Biggest Fraud Risks Banks Will Face in 2024
Experian’s annual Future of Fraud Forecast, highlighting fraud trends impacting consumers, businesses, and the financial services industry, is out.
“Fraudsters will use Gen AI, synthetic identities and new tactics to increase and perpetrate fraud in 2024,” says the Financial Brand. “Companies and financial institutions can mitigate risk with a multilayered prevention solution.”
Key takeaways from the report and webinar, as reported by the Financial Brand, follow:
- 70% of businesses report that fraud losses have increased in recent years and over half of consumers feel they are more of a fraud target than a year ago.
- APP/P2P transaction-based fraud is the most common, representing 41% of all attacks. Criminals like it because it is fast, hard to trace, and hard to recover.
- While consumers want to feel safe, they also want convenience and don’t like overzealous security measures. Half (51%) of consumers who opened an account within the last six months considered abandoning the process.
To learn more, download the infographic and webinar.
NEACH
As the payments landscape gets more complex, knowledge is key to understanding what’s next. NEACH invites you to explore NEACH U, an educational institution that provides a range of career and professional programs for individuals interested in payments. Comprised of 11 schools of study, NEACH U provides a competitive learning environment emphasizing real-world application, expertise, and community to empower students to learn new skills, develop capabilities, and build the confidence needed to improve their organization and advance their careers.
Visit NEACH U to learn more.
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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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