Last week I was very fortunate to attend the Prepaid International Forum (PIF) in the United Kingdom. I was invited by Craig James, PIFs Chairman, and his colleague Diane Brocklebank, PIF’s Commercial Director. Craig is the Founder and CEO of Neopay and is an NBPCA Board Member.
Now that we have gotten all the titles and acronyms out of the way, simply put, I thorough enjoyed my time at PIF. It was wonderful to be surrounded by experts from the UK innovative payments community. However, I was surprised to learn that the payments community in the U.K. is going through the same transition the innovative payments community is going through in the U.S.
It is clear that in the U.S. and the U.K. innovation is outpacing education. New ideas, innovation, and change in the payments sector is happening at such a rapid pace that products that were just merely concepts five years ago are on now in people’s wallets, phones, or wrists. The burden is on the industry to make sure that all stakeholders: policymakers, media, law enforcement and most importantly – consumers are aware of how our products work, the rules and regulations that are in place today to protect consumers, and there is still more change to come.
What is critical for success in the U.S. and the U.K. is a thorough understanding of the regulatory environment of each market. Issuers in each country strive to make sure they have clear disclosures, set clear standards for AML, and know their customers. Which brings me back to PIF’s event last week. PIF is tackling these issues head on and making sure their members are prepared to address the issues that innovative payments industry may encounter now and in the future.
The NBPCA (and eventually the Innovative Payments Association starting in January 1, 2019) looks forward to collaborating with our partners across the pond because I believe that our shared challenges and experiences lends itself to shared learning, which in turn will eventually lead to new understanding on how the payments community can better serve consumers.
We must always keep in mind that only until there is a nexus between consumer education and regulatory understanding can the innovative payments communities in both countries reach their potential.
Handling customer disputes well affects your entire business, so it is critical to do it well.
In the latest episode of the Power of Prepaid Podcast, the NBPCA talks with Loraine DeBonis, marketing and communications director for Ubiquity Compliance Solutions. We talk about the best practices for error resolution and best practices for handling cardholder disputes. We cover why good error resolution practices are important for customer service, preventing fraud, and regulatory compliance.
Keeping customers secure and happy is an important part of error resolution, but doing so can mean taking error resolution outside of the customer service context. Investigating a possible fraud is not always best handled by departments whose first job is to keep the customer happy. This is doubly true when it comes to cases where the customer is trying to put one over on the company.
Implementing good best practices, conducting strong investigations, and having the right people working on dispute resolution are keys for a successful program. The dispute resolution process can save money by preventing fraud. It also can help avoid regulatory hassles, because the regulators will be watching how companies handle their customer complaints.
Learn more by listening here.
Regulation is a constant concern for the prepaid industry, and compliance departments continuously need to update their knowledge just to stay ahead.
The Network Branded Prepaid Card Association held its first compliance boot camp at the offices of member Womble Bond Dickinson LLP in Atlanta to help industry members stay a step ahead of the challenges posed by the regulatory environment. The day-long session on Sept. 12 included presentations on the final prepaid rule, the balance between regulation at the federal and state level, and how to develop a culture of compliance. In addition, there were presentations on how to handle regulator inquiries and the Telephone Consumer Protection Act. The day closed with a discussion on how the outcomes of the midterms might further change the regulatory environment.
Below is an overview of the day’s insights.
Of course one of the big topics of discussion was the final prepaid rule put out by what was then the Consumer Financial Protection Bureau (now the Bureau of Consumer Financial Protection). In general the consensus of the speakers was that the rule that we have now, including its April 2019 effective date, is the final rule. Companies should make their preparations for compliance based on the rule as it stands today.
While the rule has been finalized, it is not likely to lead to an onslaught of enforcement actions. In the wake of former director Richard Cordray’s departure, the Bureau has been less aggressive in bringing enforcement actions. However, states such as New Jersey and Pennsylvania have created their own versions of the Bureau. This means that companies will need to make sure they are keeping up with compliance at both the state and federal level.
Along with the bureaus, the other banking regulators also pay attention to prepaid. The FDIC caused a stir when it said that prepaid deposits would count as brokered deposits for insurance purposes. While the FDIC director has said she plans to revisit this policy, it is still not clear how the deposits will be treated in the long run.
Because of this uncertainty, the boot camp devoted time to what to do when regulators come knocking. Companies need to make good impressions on regulators and make sure that they educate their regulators about prepaid. If they are facing an enforcement action, it is necessary to respond in a timely and professional manner, educate the regulator on the industry and the product, and work towards a rapid resolution. That resolution might be a closure of the case, a settlement, or litigation where it is important. Prepaid providers also can save themselves headaches by reviewing their advertising at least once a year to make sure that things are up to date and fully compliant.
Regulators aren’t the only ones who knock. Law enforcement also might engage with prepaid providers as the various agencies try to capture criminals. Nathan Kitchen, deputy chief of cyber and intellectual property for the United States Attorney’s Office, said that companies should establish direct contact with their local offices of the Secret Service and the FBI so that is something does happen, they can share information quickly to help stop crime and catch criminals. In addition, law enforcement will share information with companies when it makes sense to help disrupt criminal rings. While much of the cybercrime comes from abroad, agencies in this country work with those around the world and will pursue cases for years to get prosecutions.
Preparing for regulations and possible fraud requires developing a culture of compliance. The best way to do this is to talk about the interconnectivity of the business to make sure that people understand how compliance fits into all aspects of the business from advertising to operations to product design. The goal is to make compliance a partner in all aspects of a business rather than turning it into the department of ‘no.’
Because prepaid is the platform for much of the innovation that takes place, the topic of mobile wallets and mobile contacts came up. A major issue for mobile wallets is whether they will need to comply with regulation E. The determination will be made based on whether or not regulators see them as accounts under the definitions of the rule. In addition, mobile wallet providers will need to take care with how they have users promote their wallets to friends and family. The Telephone Consumer Protection Act still applies to modern devices, and it is critical to make sure that users make the ultimate decision about whether or not to share a text or promotional offer with the contacts in their phones.
Finally, the day ended with a discussion about what the midterm elections might mean for the regulatory environment. The polls and pundits are suggesting that the Democratic Party has a good chance of taking control of the House of Representatives. While this would not likely lead to new legislation or regulation for financial services companies, nonetheless it likely will result in more hearings on financial services. This could affect the way customers and potential customers handle their money and financial lives. Regardless of what way companies and executives want the elections to go, they need to make an effort to engage with their elected officials on the local level. This contact can help prevent bad bills and regulations, but it requires communication with elected officials.
The presentations covered more than can be presented in a single blog, but readers can expect to see the topics revisited with even more depth at the NBPCA’s Power of Prepaid conference in Washington DC, April 9-11, 2019.
Prepaid Fills the Gap for Consumers
As cards, phones, and faces all become ways to pay, some retailers and restaurants want to eliminate cash as a choice for their customers in order to take advantage of the benefits of electronic payments.
Yet, the problem with eliminating a payment choice has been brought into focus by a recent bill in Washington, D.C. to make it illegal to refuse cash. As The Washington Postreported, several restaurants have eliminated cash as an option, but some lawmakers in the district worry that the poor, especially those who cannot get bank accounts, will lose access to parts of the market.
Although D.C. is considering a law to make accepting cash a requirement, other places are not as concerned about the future of cash or the options of all consumers. As companies such as Sweetgreen and countries such as Sweden make efforts to get rid of cash as a payments choice, people who cannot get bank accounts may find themselves shut out of certain options in the new digital economy.
Prepaid cards, however, can form a link between the cash economy and the digital economy, serving those who may be otherwise left out in the move to electronic payments. For people locked out of traditional debit and credit cards (and those who want to avoid them), prepaid cards offer a third option to manage money, avoid debt, and maintain a wide variety of places to shop.
Prepaid cards do not require a Chexsystems or credit check, just identification verification. So, people who have had trouble managing accounts in the past can overcome previous troubles and still participate in the digital economy. Another fact in favor of prepaid is that they typically have no minimum balance requirements, which sometimes lock people out of traditional bank accounts.
The other advantage that prepaid cards offer is accessibility. Unlike banks, which typically keep bankers’ hours and have been closing branches, prepaid cards are often distributed and reloaded in retail locations that are open much longer than traditional banks. Financial deserts exist in relation to traditional banks and credit unions, but prepaid cards can bridge that gap for individuals in those areas by offering retail reload points and access to ATMs at all hours. Many cards even have the ability to be reloaded online. These diverse points of access can be particularly important for people who work nontraditional hours.
While prepaid cards have long been a helpful financial product for unbanked and underbanked individuals, these are no longer the sole users of prepaid cards. Young adults, many of whom want to avoid taking on more debt, make up the majority of prepaid cardholders. Parents who want to teach their children financial literacy opt for a prepaid card, where money can be closely managed to avoid overspending, instead of handing over a debit card.
Consumers deserve to have options when it comes to how they manage funds and pay. The prepaid card industry is working with all consumers in mind and remains committed to offering high quality, low cost banking services that make money management easy, safe, and convenient.
Ultimately, prepaid cards can bridge a gap for people who otherwise would not be able to access the digital economy. They provide a safe, convenient alternative to cash, credit, and debit cards that can open up doors that would otherwise be closed by banks, businesses, and governments. As more businesses contemplate which payment options to accept, it’s important to give consumers as many options as possible.
Ben Jackson is the COO of the Network Branded Prepaid Card Association and previously spent nearly a decade focused on prepaid card research.
In thelatest episode of the Power of Prepaid Podcast, the NBPCA talks with Dee Buchanan and Gordon Taylor, principals at Ogilvy Government Relations. We discuss the possible outcomes of the midterm Congressional elections and what they might mean for financial services regulations. We consider what happens if control of the Congress remains with the Republicans, if the Democrats take Control of both the House and the Senate, and if the Midterms leave us with a divided Congress.
In short, a Republican Congress will largely continue on the path it has taken thus far. While there are not any major bills on the horizon, the general trend towards government deregulation will continue. If the Democrats succeed in taking one or both houses of Congress, then the industry can expect more hearings on the financial services industry, though it is unlikely the president would sign any bills that would reregulate the industry. Since the Democrats are unlikely to have a veto-proof majority that means there probably will not be a lot that happens on the legislative front.
Of course, two months in politics is a very long time, so things may change by November. Regardless of the outcomes, payments companies should think local when it comes to the election. They should be prepared to engage their own representatives regardless of party and educate them about the industry.
Be on the lookout for a follow up podcast after the elections. We will reconvene with Ogilvy once the results are in and try to help orient our listeners as the dust settles.
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