Fifth Third Bank’s recent acquisition of fintech Rise Money builds on a long history of financial services innovation.
In the latest episode of the IPA Payments Pod, Tom Bianco, the general manager of embedded payments at Fifth Third, discusses the Rise acquisition and how it is part of a tradition developing new products and services. We discuss how the bank approaches questions like whether to build, buy, or partner for new products, and how it decides what areas to examine next. The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on June 1, 2023. Things may have changed by the time you hear it. You can find the podcast here, or wherever you get your podcasts. Make sure to subscribe, leave us a review, and share the podcast with your colleagues. Like most of us, regulators and legislators have plans for their summers. Unlike most of us, though, their plans aren’t for their leisure time.
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 what is happening at the state and federal levels of regulation. They cover a pending bill to ban plastic gift cards in California, a recent issue spotlight on payment apps from the CFPB, and upcoming hearings in the House and Senate with regulators. The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on June 9, 2023. Things may have changed by the time you hear it. You can find the podcast here or wherever you get your podcasts. Make sure to subscribe, leave us a review and share it with your friends in the industry. Tim Sloane, a payments expert, served as the emcee of the Innovative Payments Conference. In this blog, he provides some insights from the speakers and his conversations at the event. If you’d like to hear a discussion between Tim and our CEO, Brian Tate, about the conference, check out our podcast. Before discussing the great insights this conference delivered, I’d point out that this was the first time I’ve witnessed regulators directly engaging payment innovators regarding specific products. Listening to innovators discuss the different approaches to implementing EWA and how these approaches impact regulatory issues and then to hear regulators share their thoughts on similar product complexities was a unique opportunity! That said, I’d argue that the primary idea that cut across almost all of the presentations we heard was this: “Payment Innovation occurs in the gray areas.” Simply put, an innovative payment solution not currently vetted by regulators and operating in market is living in a gray area in respect to its adherence to existing regulatory constructs. The obvious examples of this includes three of the fastest growing solutions that were also discussed in detail at the conference: 1) Earned Wage Access, 2) Buy Now Pay Later, and 3) delivery services like GrubHub that use Just In Time Funding (JIT) integrated to business rules to assure drivers are funded only at appropriate stores as they buy goods for a specific client.
Another takeaway that doesn’t surprise a payments geeks, but is often a major surprise to non-payment professionals that expect a six-to-nine month launch window, is the time it takes to get a new product into market. Six months might be possible if the product exactly conforms to an existing payment template but if the product is innovative, then it must confront and address a complex payment value chain (bank, processor, networks, and multiple third parties) each of which are constrained by multiple complex and often enigmatic rules and regulations promulgated by state governments, the federal government, and private entities like the payment networks. Consider for example the Banking as a Service (BaaS) model that encourages BaaS be embedded into popular products. This is a simple concept to grasp, in that it introduces new banking products that can be sold to the existing consumer base. The challenge of course is that banking and payment regulations will encumber any such offering and could even encumber the traditional product that suddenly embraces BaaS. For example, moving fuds into a bank account is very different than accepting funds for a product or service. Gamers for example that didn’t require a full KYC when using closed-loop cards for in-game payments would now require it, and funds coming into the gaming ecosystem will need to be more carefully monitored for money laundering and other criminal activity. Several conference sessions, including the session on child exploitation, identified many types of criminal activity that have become disturbingly common in payments, the need to identify funds associated with these activities, and then the effort required to prosecute the criminals. The scale of the effort was highlighted by PayPal, the FBI, and private organizations dedicated to helping victims. Many preventative activities are performed not due to government mandate, but by a moral mandate. As such it appears to me that it would be wise for companies to fund a law enforcement operations center both for their consciences and to garner social credit. Two sessions looked at the role of AI in payments and identified both the good news and the bad news. AI will help payment suppliers detect and catch the criminals just discussed. However, the broad availability of AI will also enable more criminal activity that challenges detection by humans, which suggests that an AI defense is likely to become the only way to stem the tide. Criminals are already using voice and facial deep fakes to trick consumers and are likely to directly target the voice and facial recognition solutions deployed in banks and payment solutions that are currently deployed. Deep fakes will also be used as an attempt by criminals to establish simulated identities that can bypass traditional KYC solutions. This suggests that adversarial AI will need to be created that trains KYC solutions to recognize deep fakes. Making mass transit easier to pay for was also a theme that came through and it highlights the complexity that can evolve over time when independent agencies create solutions that are tightly aligned with their own needs. One example is the huge investment in ride control systems in many cities and states. These were designed first to support locally struck tokens, then locally issued prepaid cards. This infrastructure investment makes the deployment of a traditional card-based payment solution very expensive and in some instances requires upgrades to the payment networks themselves, for instance to meet the speed requirements associated with processing a stream of subway riders rushing through gates to catch a train or to replace a single ticket that enables both a subway ride and a bus ride within a certain zone. Stu Richards, CEO of Bredin, provided a deep dive survey to gauge how small business owners have implemented payments, what features they need, what they are likely to invest in over the next 12-18 months. The survey also asked what messages and message delivery channels payment providers need to focus on to break through the noise. Dan McCrum’s review of the rise and fall of WireCard was mesmerizing. It reminds all of us in payments that people often place far too much credit in a good story and so fail to test those stories to detect fraud taking place right under our nose. Add investment bankers and government to the list of those caught up in the lie and billions of dollars can be lost and foreign armies funded. Successful innovation in financial services requires a number of elements to come together in just the right way.
Innovators need to combine new technology, market opportunities, and regulatory compliance to create the next generation of successful products. The keys to making this combination work came out in the IPA’s recent conference. In the latest episode of the IPA Payments Pod, Brian Tate, the IPA’s CEO, and Tim Sloane, the moderator of our conference discuss the themes and clues for success that the conference speakers revealed. They discuss the growth of AI, the threat of financial crimes, and regulatory trends. The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on May 25, 2023. Things may have changed by the time you hear it. You can find the podcast here or wherever you get your podcasts. Make sure to subscribe, leave us a review, and share it with your colleagues in the industry. Galileo explains how to be successful in Banking as a Service
This podcast was recorded on May 18, 2023. Things may have changed by the time you hear it.
Can a book written in the 1500s teach us anything about the modern payments industry?
That is the question the IPA team is tackling with our latest book club reading, “The Prince” by Nicolo Machiavelli. Originally written as a guide to power for political leaders battling over city states in renaissance Italy, the book has been on the reading lists of politicians, business leaders, and academics over the past 500 years. In the latest episode of the IPA Payments Pod, Brian Tate, the IPA’s CEO, and Chris Stromberg, the director of government relations, look at the book through a modern lens and see what lessons it might have to offer to anyone looking to wield power today. They also examine whether or not political and business principles intersect. The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on May 3, 2023. Things may have changed by the time you hear it. You can find the podcast here, or wherever you get your podcasts. Choose Your Own Fintech Adventure: A New Report from Bank Director Magazine Guides the Way for Banks4/28/2023
Buying new technology can be a real adventure for banks that want to keep up with the times, so the real question is how to avoid the pitfalls that can come when investing in fintech.
In the latest episode of the IPA Payments Pod, Kiah Haslett, the managing editor of Bank Director Magazine and Laura Alix, the magazine’s director of research, discuss their new report “Finding Fintechs” and how it can help banks choose their own adventure when it comes to buying Fintech. Their definition of “Fintech” is a little broader than the common parlance. They talk about the strategic and practical considerations for adding new technology, and why the short-term bottom line may not be the best investment criteria. You can find the episode here, or wherever you get your podcasts. Please make sure to subscribe, leave us a review, and share it with your colleagues who might be interested. You can find the report here: Finding Fintechs: A Choose Your Own Adventure Guide | Bank Director The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on April 11, 2023. Things may have changed by the time you hear it. The recent failures of Silicon Valley Bank and Signature Bank may not be the biggest news in financial services.
In the latest episode of the IPA Payments Pod, the IPA’s CEO, Brian Tate, and Chris Stromberg, the IPA’s director of government relations, talk about current events that could shape the future of the payments industry. They get into the Supreme Court case on the CFPB’s funding, what is happening on Capitol Hill, and the CFPB’s announcement on UDAAP. The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on April 13, 2023. Things may have changed by the time you hear it. You can find the latest episode here. Make sure to subscribe, leave us a review, and share it with your colleagues. The Second Installment of the IPA Book Club delves into the realm of Bitcoin, blockchains, and all things crypto with The Age of Cryptocurrency by Paul Vigna and Michael J. Casey.
In the latest episode of the IPA Payments Pod, the IPA’s CEO, Brian Tate, and Ben Jackson, the IPA’s COO, discuss their thoughts on the book. They cover what they think the book got right, where it went in the wrong direction, and what the book can tell us about where the payments industry is headed. As Brian mentioned, the next book will be The Prince, by Niccolò Machiavelli. If you have read the book and have strong feelings about it or want to read it and discuss it with us, email our host at bjackson@ipa.org, and maybe you can be on the show! The IPA thanks our member sponsor, Netspend, for helping to make this show possible. This podcast was recorded on April 5, 2023. Things may have changed by the time you hear it. Payroll information is used for all kinds of financial decisions, but individual workers and employers often need to jump through hoops to share it.
In the latest episode of the IPA Payments Pod, Jordan Wright, Atomic’s CEO and co-founder, describes how the IPA member is working to solve the problems that employers and employees face when trying to share payroll data. We discuss how the availability of that data can enable lenders, insurers, and even employers to offer a better experience and broader set of financial products for workers than they can without it. 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 episode here or wherever you get your podcasts. Please make sure to subscribe, leave us a review, and share it with your colleagues. |
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