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In the brave new world financial services, there are opportunities for both innovative companies and traditional banks, but they need to understand one another if they want to thrive, says Joyce Mehlman, the founder of iLex Consulting Group.
In the latest episode of the IPA Payment Pod, we talk about why Fintechs need to understand the difference and relative value of Banking as a Service versus a direct issuer model of working with banks. We also discuss how traditional banks need to understand where Fintechs offer more in terms opportunities than competition. In addition, she explained how the latest group of Fintechs and their founders are different in that they are more focused on building a business long-term than they are in building up a company that can be sold. Listen to the new episode now.
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Banks and Fintechs may need to re-evaluate their relationships depending on what advice the regulators decide to give them. Looking to keep up with the times, on July 13 the federal bank regulatory agencies (FDIC, Federal Reserve, and OCC) requested public comment on proposed guidance designed to help banking organizations manage risks associated with third-party relationships such as Fintechs.
In the latest episode of our podcast, we talk with Brian Tate, the IPA’s CEO, Grant Hannah, the government relations director, and Eli Rosenberg from Baird Holm, about what the changes might mean, how the industry can respond, and where this fits into the big picture of regulation. You can find the proposed guidance here. You can find the episode here. When we think of consumer financial data, the first thing that comes to mind is usually banking data, but that is an incomplete picture.
This was borne out in a recent executive order, in which the Biden Administration encouraged the Consumer Financial Protection Bureau (CFPB) to issue rules allowing customers to download their banking data and take it with them. Increasingly portability of banking data can help consumers, but a more robust picture can be painted by making sure consumers have easy access to their own payroll data as well, says Lindsay, Davis, the head of markets for Atomic Financial. In the latest episode of the IPA Payments Pod, we discuss the importance of payroll data and how better access to it can improve the lives of consumers and make things easier for businesses and financial services companies. You can listen to the episode here. You can find the fact sheet on the executive order here. The full text of the order can be found here. You can learn more about Atomic here. Capitol Hill has been taking an active interest in the payments industry. Overdraft, buy now pay later products, and even a possible computer chip shortage have all drawn lawmakers’ attention.
On top of all that, the Durbin Amendment has resurfaced as a topic of conversation, and there are rumors that it may be extended to other types of payments. We cover all of this and more in our latest podcast episode with the IPA’s CEO, Brian Tate, and our Government Relations Director, Grant Hannah. To learn more about the forces shaping the payments industry, we encourage our listeners to join the IPA for its Summer of Learning Webinar series, where we talk with regulators, industry leaders, and analysts about what they see coming in the world of payments innovation. Learn more and register at www.ipa.org. How a pandemic led to a new vertical for the company
The pandemic created problems for individuals, governments, and businesses, but as the old saying goes, every problem brings new opportunities. For Blackhawk Network, that opportunity began when it channeled its payments expertise into helping distribute relief money for governments and nonprofits. It used both closed-loop and open-loop prepaid cards as a way to deliver aid. The plastic and virtual cards were used to replace checks so that people could get access to funds quickly and inexpensively. As the pandemic begins to subside, Blackhawk plans to continue working to deliver funds to vulnerable populations. The company has created a new vertical that it calls Payments for Good to work with governments and nonprofits who need new ways to disburse money. In this episode, we talk with Tyler Gentry, the director of Payments for Good, about the work that led to its creation and the company’s future plans.  What is your company’s role in the payments industry (program manager, issuer, processor, service provider, etc.)?
Lindsay Davis, Head of Markets, Atomic: Atomic is a digital services provider. Our payroll integrations are the payments infrastructure to securely connect end consumers to financial data and automate setting up and updating direct deposits. Atomic is the market leading provider of payroll APIs, trusted by 10 of the largest fintech firms, including digital-first neobanks, alternative lenders, and digital brokerages. We are also the destination for direct deposit acquisition and enable features such as early paycheck and fractional payments, for banks, credit unions, and financial services partners. What kinds of payments do you support? Direct deposits account for our largest volume of payments and we also support ACH credits. A few use cases we support include payments by state unemployment systems and non-standard direct deposits from payroll providers such as fractional disbursements and non-recurring payments. For market sizing context, in 2020, direct deposit accounted for 12% of ACH volume, representing 8 billion payments for salaries, wages, benefits, and assistance from employers to individuals, according to NACHA. Atomic is also working with partners to digitize physical payments and reduce payroll fraud. While 94% of workers receive their pay electronically by direct deposit, checks capture off-cycle payments, such as real-time payouts and wages for non-W2 workers. The Federal Reserve collected 940 million paper checks worth $2.14 trillion in Q3’20. What kinds of special features do your products and services offer? Atomic simplifies complicated payroll integrations with a single API that covers over 165 unique payroll connections. Including incumbent payroll providers, bespoke enterprise solutions, modern HR tech providers, gig-economy platforms and government systems, Atomic’s payroll APIs cover approximately 65% of the U.S. workforce with a combined reach of 95 million workers. Combining those elements gives us a stronger conversion benchmark to traditional players. Put simply, Atomic’s payroll APIs connect consumers to their paycheck and financial data trapped in payroll systems. This solves two problems for our customers and their end users. The first is accelerating payday for consumers through a streamlined portal to set up or change direct deposits. For neobanks and brick-and-mortar banks we work with, this improves direct deposit acquisition and creates a better user experience. The second problem we solve is qualifying users for financial services – for instance, loans or credit – that are contingent on income and employment data (VOI & VOE). The data behind the paycheck, such as gross earnings, earnings net of taxes, employment type and status, among other insights, are all accessible to consumers digitally. As the surface area for digital payments expands, so do the threats for fraud. Further, fraudsters are only getting more sophisticated. By reducing the circulation of paper checks and use of pictures and screen shots, we have been able to prevent payroll fraud for customers and blacklist scammers across Atomic’s customers. We have also obtained our SOC II certification and are in compliance with consumer data protection regulations including CCPA and GDPR to ensure consumers know their data is secure and they are always in control of who has permissioned access to their financial records. What kinds of companies are you looking to partner with? We are looking for partners that share our vision to build more on-ramps to financial services for consumers and ways to collaborate to achieve our shared goal of democratizing payments while mitigating fraud. Payroll APIs is a nascent category we are actively bringing to market with our customers, partners, and peers in the industry. We have had positive momentum however, only made a dent in our mission. We welcome opportunities to increase industry acceptance, adoption, and bring new applications for payroll APIs to market with members of the IPA, regulators, payroll providers, fintech firms, and financial intuitions. What do you think the future of payments holds in the next five years? The future is bankless accounts enabled by APIs, akin to Henry Ford’s horseless carriage, and it’s here now. In 2020 branches were rendered irrelevant and despite adapting to the “innovate or die” philosophy of fintech, banks are debating the past and fast following fintech playbooks. It might take longer than five years, however, in time we’ll evolve entirely from the branch-based model to mobile-first, as it’s already happening now, something we shared further insights on in our Atomic Intelligence newsletter here. Keeping up with financial regulations can be a tough job for anyone.
The Innovative Payments Association is here to help our members – and the payments industry at large – keep track of laws and rules that could affect their businesses. We also give a voice to the industry, so they can talk to regulators and legislators to help foster an environment where companies can continue to innovate and grow as they help individuals and businesses meet their financial goals. In this episode, Brian Tate, the IPA’s chief executive officer, and Grant Hannah, the director of government relations, talk about potential legislation and regulation at both the state and federal level, and we discuss lawsuits that will affect the industry. Members wanting to learn more, should plan to join our weekly and monthly government relations calls. We also welcome direct questions from our members. Nonmembers can visit www.ipa.org to learn how to join. As the fintech industry continue to innovate, one of the big questions is where does it go from here?
The future direction of the industry may be best represented by a company that has gone through its evolution. Green Dot is one of the original Fintechs. It started with prepaid cards sold mostly through retail and has since evolved into a leader in the digital bank space. Its change from a prepaid card program managers to digital banking companycould foreshadow the future. In this episode, we talk with Greg Quarles, president of Green Dot Bank about how the company has evolved to work with tech partners like Apple, Google, and Uber. We also discuss the advantages of having a bank charter, and why other fintechs will need to consider adding products like lending if they want to thrive in the long run. Over the last 18 months, the dramatic changes in the ways that people live, work, and pay have meant that fraud prevention rules that were once very effective have lost some of their power.
In the latest episode of the IPA Payments Pod, we talk with Brian Grech, vice president of sales and marketing for Deep Labs, which uses persona-based artificial intelligence to predict behavior and prevent fraud. We cover how the pandemic created new risks that were not covered by old models, so what once looked like fraud could be a legitimate transaction, and what once looked legitimate could be fraud. We also talk about what artificial intelligence is and how it can help companies adapt to rapidly changing environments. As we come out of the pandemic, the business environment is evolving rapidly. So, as we adjust to a new normal, companies will once again need to think ahead and figure out what lessons still apply, and what has changed now that the pandemic is over. You can find the podcast here, or wherever you get your podcasts. The regulatory environment for payments has become very active over the past few weeks, with proposed rules, congressional hearings, and even lawsuits. In this episode of the IPA Payments Pod, our CEO, Brian Tate, and our Government Relations Director, Grant Hannah, help to make sense of everything that has been happening.
There are proposed rules on transaction routing and advertising FDIC insurance. There is a lawsuit over interchange fees. And a major fintech was sanctioned in two states for its advertising. This is all just the tip of the iceberg. To stay in the know, subscribe to our podcast and make sure to attend the IPA-member government relations calls. If you are not a member, visit www.ipa.org to learn how to join. |
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