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Blog

The CFPB Remains the Center of Payments Regulation, But Where Does It Go From Here?

3/16/2023

 
While questions have been raised about its future, the Consumer Financial Protection Bureau still remains at the center of payments regulation in Washington.  

In the latest episode of the IPA Payments Pod, Brian Tate, the IPA’s CEO, and Chris Stromberg, IPA’s director of government relations discuss everything that has been happening with the Bureau and try to put it into context.

They discuss the Bureau’s recent announcements, Congressional inquires to the Bureau, and the pending Supreme Court cases.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  

This podcast was recorded on March 9, 2023. Things may have changed by the time you hear it.  

You can find the latest episode here, or on your favorite podcast app. ​

Effective Compliance for Innovators: How can fintechs create effective compliance with limited resources?

3/6/2023

 
How can start-ups create effective compliance programs with limited resources? 

This is a question many founders struggle with, and the key to is success is recognizing when they need help.  

In the latest episode of the IPA Payments Pod, Jamie Uppenberg, the founder of Uppenberg Associates, discusses how fintechs can build an effective compliance program that grows with the company. 

She covers how compliance is more than just a good set of documents, how fintechs and banks should communicate, and what banks should look for in their partners. 

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  

This podcast was recorded on February 23, 2023. Things may have changed by the time you hear it.  

You can find the show here, or wherever you get your podcasts. Please make sure to subscribe and leave us a review! 

Lessons from The Big Short: Can the 2008 financial crisis teach us about fintech?

2/23/2023

 
Did the financial crisis leave us with any lessons that apply to a rapidly evolving payments industry? 

To dig into this question, the IPA staff recently read and had a discussion on Michael Lewis’s book, The Big Short. The IPA’s CEO, Brian Tate, and Chris Stromberg, our director of government relations joined Ben Jackson to discuss the book and what it can tell us about our current situation.  

This podcast is the inaugural episode for the IPA book club. Over the coming year we plan to read a number of books that address the theme of innovation inside the financial services industry and beyond. We invite our listeners to read along and let us know what you think. If you have a particularly strong opinion on one of our selections, we’d be happy to include you in an episode.  

Our March book will be The Age of Cryptocurrency, by Paul Vigna and Michael J. Casey.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  

This podcast was recorded on February 15, 2023. Things may have changed by the time you hear it.  

You can find the episode here or wherever you get your podcasts. Please make sure to subscribe and leave us a review! 

IPA’s February Government Update Podcast

2/16/2023

 
Activity in all three branches of government could lead to changes in payments.  

From congressional hearings to court cases to the State of the Union, payments is getting its fair share of attention from the federal government. In the latest episode of the Innovative Payments Pod, the IPA’s CEO, Brian Tate, and Chris Stromberg, our director of government relations, discuss how these things are shaping the operating ecosystem for payments companies.  

You can find the latest episode here or wherever you get your podcasts. Please make sure to subscribe and leave us a review.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  
​

This podcast was recorded on February 9, 2023. Things may have changed by the time you hear it.  ​

Galileo Launches BNPL for Banks to Meet Customer Needs

2/9/2023

 
Buy Now, Pay Later products have emerged as a new financing tools for shoppers and merchants, and now Galileo wants to help banks make use of this new type of payment. 

People who run into an unexpected or emergency expense may need an option for short-term financing. Galileo’s new tool gives banks another way to offer these funds to their customers.  

In the latest episode of the IPA Payments Pod, Dave Feuer, Galileo’s chief product officer, talks about how the product can help customers make ends meet, and make banks more competitive.   

You can find the episode here or wherever you get your podcasts. Please subscribe, share, and leave us a review.  
The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  

This podcast was recorded on February 2, 2023. Things may have changed by the time you hear it.  ​

Putting the B in Banking as a Service: Pathward’s Rebranding is about more than just a name

2/3/2023

 
When Pathward bank decided to rebrand, the changes meant a lot more than just new a new logo.

In the latest episode of the IPA Payments Pod, Pathward’s President Anthony Sharett, explains how the name change included structural changes at the bank and a refocused strategy.  

He also discusses the company’s financial inclusion mission, the trends it sees in payments innovation, and how it chooses partners.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  

This podcast was recorded on February 13, 2023. Things may have changed by the time you hear it.  

Crypto and the Future of Payments: A Recap of the recent IPA Event

1/26/2023

 
While the future of payments will undoubtedly include blockchains, cryptocurrencies, and stablecoins, what will that mean for the industry?

To start answering this question, the Innovative Payments Association recently held its “Crypto Universe from A to Z event at the offices of Davis, Wright, Tremaine, in Washington DC.  

In the latest episode of the IPA Payments Pod, we discuss the themes and ideas that emerged during the day with Tim Sloane, who moderated the discussions. 

The IPA thanks Davis, Wright, Tremaine for hosting the event.  

We also thank our member sponsor, Netspend, for helping to make this podcast possible.  

This podcast was recorded on January 23, 2023. Things may have changed by the time you hear it.  

The New Year of Regulation Will Be Shaped by 2022’s Big Events

12/21/2022

 
The past year has been a busy one in financial regulation. Crypto crashes, court cases, and Congressional clashes will all have effects that will have effects into 2023 and beyond.  

In the latest episode of the IPA Payments Pod, Brian Tate, the IPA’s CEO, and Chris Stromberg, our director of government relations, discuss the past year’s events with an eye to how they will shape the future of regulation and the payments industry. The industry could see major changes to way it is regulated, so now is the time to make sure that your compliance team is on the ball.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  
​

This podcast was recorded on December 19, 2022. Things may have changed by the time you hear it.  

​Brookings Institution Report Quashes Claims of Cryptocurrency and Financial Inclusion

12/21/2022

 
Introduction
The Brookings Institution, a nonprofit public policy organization, recently published a report entitled “Debunking the narratives about cryptocurrency and financial inclusion.” The report analyzes the claim that the development and adoption of cryptocurrencies can increase financial inclusion of the unbanked, underbanked, and minority populations, including Black, Latino, and Hispanic communities. The report’s author, Tontantzin Carmona, suggests that popular claims of cryptocurrency increasing financial inclusion of these populations may be exaggerated at best, or completely false. 
 
Financial Inclusion Claims of Crypto Proponents 
Carmona begins her report by reviewing the two most widespread narratives about financial inclusion related to crypto. The first narrative she discusses is that cryptocurrencies will provide easy access to financial services and will offer the unbanked and underbanked a mechanism for making financial transactions. This narrative suggests that the main reason unbanked households have difficulty accessing banking services is because they live far from a bank, the bank is open at inconvenient hours, or they lack the ability to use digital payment options. It also suggests that crypto be used as a currency spent on everyday goods and services. The second narrative that Carmona discusses is that cryptocurrency can, and should, be viewed as long-term, buy-and-hold investment that Black, Latino, and Hispanic individuals and households can use as they seek upward economic and financial mobility, rather than as a currency used for everyday goods and services. 
 
Carmona notes the dichotomy of these competing objectives and the conflict it creates. Either cryptocurrency should be treated similar to traditional currency and transacted on a daily basis, or households should treat cryptocurrency as a long-term investment. Cryptocurrency held by an unbanked, underbanked, or minority household cannot accomplish both objectives simultaneously. Thus, it is not clear which financial inclusion problem cryptocurrency is trying to solve. 
 
Can Crypto Help the Unbanked?
As for the claim that cryptocurrency should be considered a tool for unbanked, Carmona rightly points out something that users of crypto already know — most crypto platforms and exchanges require a linked bank account to fund the crypto account and initial purchases of cryptocurrency. Moreover, due to the notoriously volatile nature of cryptocurrencies, their price fluctuations make them unsuitable and unreliable as a means of everyday payment. Thus, regardless of the utility of cryptocurrency stored on cryptocurrency exchanges and platforms, consumers will almost certainly also require an account at a traditional financial institution holding U.S. dollars. 
 
Carmona points out that what vulnerable populations really need is access to a fast, secure, and convenient payment system, and that crypto proponents’ solution—, stablecoins — is also ill-suited for this purpose. Presently, stablecoins’ primary purpose is the facilitation of trading, lending, and borrowing of other digital assets within the crypto ecosystem, rather than outside of it. Regardless of the potential utility of stablecoins to facilitate payments in the future, like other cryptocurrencies, the purchase and exchange of stablecoins requires a cryptocurrency exchange, which in turn almost always requires the linking of a traditional bank account holding U.S. dollars. Thus, the utility of stablecoins for the unbanked is mitigated by the requirements of the stablecoins themselves. 
 
Is Crypto a Wealth-Building Tool?
The second narrative that Carmona tackles in her report is that of cryptocurrency as a wealth-building tool. One only needs to read the news to understand the problem with encouraging minority populations to buy-and-hold cryptocurrency to increase their wealth and financial mobility. In spite of years of investment and development poured into crypto, it has never developed beyond a speculative asset. Cryptocurrencies have no intrinsic value and are not backed by anything; they derive their value simply from other investors and potential investors believing they are good investments.  If that changes, the value can drop to nothing. This is particularly risky for lower-income, vulnerable populations who may invest a greater proportion of what wealth they do have into speculative cryptocurrency investments. 
 
CoinJournal recently reported that since 2014, 316 cryptocurrency exchanges have failed and, most shockingly, 42% of those failed exchanged vanished without a trace, taking accountholder funds with them. Notable examples of failed exchanges include Celsius, Three Arrows Capital, Voyager Digital, and most recently FTX. Between $1 and $2 billion of client funds is missing at FTX alone, spanning from retail investors to the Ontario Teachers’ Pension Fund, who had invested $95 billion in FTX. There is no doubt that vulnerable populations, such as low- middle-income retail investors and minorities are among the victims of FTX’s dramatic failure. 
 
Statements from Policymakers 
Given the increased attention that cryptocurrency is receiving on Capitol Hill, it should be no surprise that policymakers are making statements about the purported benefits of cryptocurrency in increasing financial inclusion for underbanked and unbanked populations. What is interesting however, is the different opinions, even among members of the same party, on the effectiveness of cryptocurrency related to financial inclusion. Sen. Cory Booker (D-NJ), well-known for his support of cryptocurrency, stated at the 2022 DC Blockchain Summit that “people of color look at big financial institutions for what their history shows them to be: discriminating against vulnerable communities.  It’s no surprise the African Americans and Latinos are turning to a world that is a decentralized world, that they hope will be a more level playing field.”
 
On the other side of the spectrum, Sen. Sherrod Brown (D-OH), Chairman of the Senate Banking Committee, stated during a hearing on cryptocurrency that “crypto doesn’t actually function as real currency in any traditional sense. Allowing more people to trap their money in risky, speculative investments isn’t the kind of financial inclusion we need. It’s not going to do anything to help Americans working hourly jobs who don’t put their paychecks in the bank because of abusive fees.” It is clear from these opposing statements that even members of the same political party disagree on the financial inclusion benefits of cryptocurrency. The question is which opinion holds more weight among vulnerable populations?
 
Recommendations
Carmona recommends that regulators view crypto’s purported benefits as similar to those of other alternative financial services that attempt to the fill gaps left by traditional financial services, such as payday lending, check cashing services, and remittance services. She adds that regulators should also implement baseline consumer protections that provide the same level of consumer protections that an account holder would receive at a bank or other traditional financial institution.  
 
Other recommendations that Carmona presents in her study are (1) the agency that oversees cryptocurrency should have an explicit investor protection mandate and significant resources to monitor the industry, (2) financial literacy materials should prioritize transparency and accountability, (3) crypto companies should be required to disclose the gender and racial diversity data of their workforce and board members, and (4) government officials should be asked, if not required, to refrain from making misleading claims regarding crypto and financial inclusion. 
 
Carmona closes her report by outlining more direct and impactful ways that financial inclusion can be addressed rather than the use of cryptocurrencies, like real-time payments solutions such as FedNow, direct checking accounts and transaction services through the post office, and requiring financial institutions to offer basic, no- or low-cost bank accounts.
 
Closing
Regardless of the potential utility of cryptocurrency to the financial system as a whole, one thing is clear, claims made by crypto’s proponents of the importance of cryptocurrency as a tool to increase financial inclusion are misleading, even dangerous, to vulnerable populations who may invest in cryptocurrency either as a tool for everyday transactions, or as a long-term investment. 
 
While further development and implementation of crypto- and blockchain-based financial products are likely, and there very well may be valid business-related reasons for bank- and non-bank financial service providers to offer these products, members of the Innovative Payments Association should reconsider financial inclusion as a reasonable justification for their investment and development of such products. 

Innovation Requires an Even Keel and a Little Luck

12/14/2022

 
ExpanseFT is a new name in fintech that is backed by experience. 

The company, which is over 10 years old, announced in October that it had changed its name from Prepaid Ventures.  
In the latest episode of the IPA Payments Pod, Andrew Siden, the chief executive officer of ExpanseFT, describes the company’s creation, its growth, and how the name change is rebranding it for the future. 

In the interview, he also discusses how to incorporate innovation into products and what entrepreneurs need to keep in mind to be successful. We also discuss the importance of timing and luck.  

The IPA thanks our member sponsor, Netspend, for helping to make this show possible.  
​

This podcast was recorded on November 16, 2022. Things may have changed by the time you hear it.  
 
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