The IPA has been published on Newsweek. Below is an excerpt from the article. We invite you to click over and read the full article.
Innovation and risk sometimes go hand-in-hand, but a partnership between industry and regulators can bring the best outcome for everyone.
The financial services sector has brought new technology to the market that helps solve problems for individuals, businesses and even government agencies that want to manage their money more effectively. The regulators have taken an interest in the new technology, but there is a risk that consumer benefits could become collateral damage if a fight breaks out. I've seen both sectors engage in their respective ways in my position now as a chief operating officer for a national payments association and throughout my career as a consultant and journalist covering financial services.
How can the financial services industry work with agencies like the Consumer Financial Protection Bureau to create the best outcome for all Americans?
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Below is an excerpt of an article by IPA CEO, Brian Tate that was published in the American Banker. We invite you to click over and read the full article.
A recent article in American Banker, “Prepaid card debacles, from BofA to the Kardashians,” paints a distorted picture of an industry that has and continues to provide value, innovation, security and efficiency to individuals, businesses and government agencies.
Prepaid accounts — including general-purpose reloadable prepaid cards, payroll cards, cards used to distribute government benefits, peer-to-peer products, and mobile wallets — represent some of the fastest- growing payment methods in the country. For nearly 20 years, prepaid products have brought value, innovation, security and efficiency to cardholders, employers and government agencies.
Read the full article here.
The entire financial-services industry shot itself in the foot with free checking.
Free checking taught customers that they should not pay any fees for the services they receive from banks and other financial companies. The attitude is, “Why should I pay to access my own money?” Since these same customers may also be some of the people who work at the regulatory agencies, it is not hard to see how this attitude would start shaping the regulatory climate.
On Jan. 26, the Consumer Financial Protection Bureau released a “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services.” The Bureau made up for the bland title in its press release, saying the request was the start of an “an initiative to save households billions of dollars a year by reducing exploitative junk fees charged by banks and financial companies.”
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The Consumer Financial Protection Bureau’s recent data requests show how regulators are teaming up and provide clues about the near future.
In October 2020, the Bureau announced that it requested data from Amazon, Apple, Facebook, Google, PayPal, and Square (now Block) about their payments operations, and that it would compare what it learned with research into Chinese fintechs Alipay and WeChat Pay. They asked about data harvesting and monetization, the notion of locking consumers into using their products, and consumer protection.
Then, in December, the Bureau sent detailed data requests to buy now, pay later companies Affirm, AfterPay, Klarna, PayPal, and Zip. In a 16-page request, it asked for detailed information about these companies’ operations, customer bases, and revenue models. It also included specific questions about data harvesting and monetization.
The birth of cryptocurrencies and the digitization of payments have led central banks worldwide to consider launching their own digital dollars.
These central bank digital currencies (CBDC) could either supplement or replace government-issued cash as legal tender. Proponents say the tokens could offer benefits to citizens, governments, and businesses, while others have concerns about the effects they could have on privacy and the commercial banking and payments industry.
As of now, almost 50 countries have a central bank digital currency in some stage of development, and another 40 are researching the idea, according to the nonprofit Atlantic Council. The Web site CBDCtracker.org lists five countries that have canceled their CBDC currencies, including Finland, which launched a card-based program called Avant in 1992 to replace cash for small transactions.
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Testimony of Brian Tate President and CEO of the Innovative Payments Association Before the House Financial Services Committee Task Force on Financial Technology
Chairman Lynch, Ranking Member Davidson, and members of the Task Force on Financial Technology, my name is Brian Tate, and I am the President and CEO of the Innovative Payments Association (IPA).
It is my privilege to appear before you today to share IPA’s views on emerging Fintech cash flow products with specific emphasis on the use of earned wage access services.
IPA is a non-profit trade association that serves as the leading voice of the electronic payments sector, including prepaid products, mobile wallets, and P2P payments. IPA’s mission is to encourage efficient use of electronic payments, cultivate financial inclusion, and empower consumers.
As we have learned throughout the pandemic, even the best laid plans cannot always protect families from unexpected financial disruptions.
The Federal Reserve’s 2018 Survey of Household Economics found that 40% of American households would struggle to come up with $400 to pay for an unexpected bill. Many consumers have few options should they face an unexpected expense between paydays, and the traditional options have proven to be expensive.
The U.S. Department of Labor reports nearly two-thirds of U.S. businesses pay their workers on a bi-weekly, semi-monthly, or monthly schedule, which means that workers are, in essence, giving their employers an interest-free loan. A study by the Financial Health Network found that 38% of respondents reported timing mismatches between wage income and expenses.
During the past ten years, the payment innovators have developed new services and products to help consumers meet these timing mismatches. One of the most practical and affordable options is Earned Wage Access, or EWA. Simply put, EWA programs allow consumers to access their own money prior to payday.
Getting paid daily is not a new concept. Many Americans, including wait staff, taxi drivers, and bartenders, can get paid at the close of their shifts.
The two former leaders of the CFPB – Directors Cordray & Kraninger – didn't agree on much, but both took concrete steps to support EWA. Director Cordray exempted employer-sponsored programs from his 2017 payday lending rule. And Director Kraninger issued an advisory opinion explaining that certain EWA programs are not credit. IPA agrees with both Cordray and Kraninger and maintains that EWA products are not loan or credit products, Therefore, they should not be subject to TILA.
The Financial Health Network’s report on EWA found consumers in financial distress may consider title, payday, or pawn loans as options. With the average cost per EWA transaction ranging between $2.59 - $6.27, the report makes it clear that EWA is far less costly than those other options.
EWA has grown in popularity because it is a safer, cheaper, and more efficient alternative to other short-term products on the market. EWA providers do not impact customers’ credit ratings and they do not share information to credit reporting agencies. EWA is offered with no recourse and providers have no rights
against the user in the event of nonpayment, loss of employment, closed accounts, or blocked payments. These are non-recourse transactions, which means the risk of loss is on the provider.
As someone who has been working since the age of 14, I can easily relate to a retail worker, single parent, or young adult facing a financial emergency and lacking easy access to short-term liquidity. At different points in my life, I have walked in the same shoes as millions of Americans who find themselves unable to pay for a utility bill, childcare, or an unexpected medical expense.
Treating EWA as credit would be a mistake and would remove a valuable tool from consumers’ financial toolkit.
Thank you for the opportunity to present the views of the IPA and I welcome any questions the Task Force may have.
The IPA has signed a letter alongside 98 other trade association and companies opposing the proposed new tax information reporting regime from the Biden Administration as part of the proposed Reconciliation package pending in Congress. As a reminder, the proposal would require providers of financial services to track and submit to the IRS information regarding every account above a de minimis threshold of $600 during the year. Similar to the previous coalition letter addressed to Congress, this current letter is addressed directly to President Biden and urges him to withdrawal the proposal. The letter was sent to the White House this morning.
Washington, D.C. (October 27, 2021) — The Innovative Payments Association (IPA) President & CEO, Brian Tate, has released the following statement on President Joe Biden’s nomination of Professor Saule Omarova to be the next Comptroller of the Currency (OCC).
The IPA encourages the U.S. Senate Banking Committee to thoughtfully review Professor Omarova’s qualifications to be the next Comptroller of the Currency. Moreover, we urge Members to thoroughly explore her stated views on the private banking system, which appear on their face to be inconsistent with previous banking agency precedent and leadership who served in this critically important role, regardless of party affiliation.
Americans’ lives have been disrupted at all levels by the pandemic. The payments community has worked hard to make it easier for Americans to receive government benefits, adapt to the demands of a remote-based economy, and protect against fraud. Regulators need to help maintain certainty for all Americans and businesses as the country transitions to normalcy.
Members of the payments community have raised concerns about Professor Omarova’s nomination because she has expressed very strong views in favor of disrupting the nation’s banking system. Professor Omarova has proposed, amongst other things:
It is critically important that the next Comptroller of the Currency have a fundamental understanding of the challenges the financial system faces and a sense of what viable solutions can developed to improving consumers’ financial lives.
Washington, D.C. (September 9, 2020) – The Innovative Payments Association (IPA) today released the following statement announcing Invest Sou Sou and Frizzmo as the winners of its inaugural Fintech Elevator competition.
“The IPA is excited to announce Invest Sou Sou and Frizzmo as the winners of our first Fintech Elevator Competition,” said IPA President and CEO Brian Tate. “Both of these companies impressed the audience and our judges, and we are pleased to welcome them as our newest members of the Innovative Payments Association.”
IPA COO Ben Jackson continued, “While we heard from a strong field, Invest Sou Sou’s social banking APIs takes a new approach to customer acquisition through social networking, and Frizzmo’s platform helps children and young people become financially responsible, while offering a way to support their local schools. These showed the judges and our voting audience innovation that stood out.”
IPA’s Fintech Elevator competition offered applicants from across the country the opportunity to pitch IPA members, payments investors and partner companies in the hopes of earning a membership into the IPA. As members, Invest Sou Sou and Frizzmo will be able to leverage the IPA’s resources and network to advance their business models and boost their growth moving forward. Six submissions were selected from the applicant pool and given the opportunity to make their pitch. Invest Sou Sou and Frizzmo were crowned the winners following the presentations based on voting by both judges and the audience.
About the IPA
The Innovative Payments Association (“IPA”) is a trade organization that serves as the leading voice of the electronic payments sector, including prepaid products, mobile wallets, and person-to-person (P2P) technology for consumers, businesses and governments at all levels. The IPA’s goal is to encourage efficient use of electronic payments, cultivate financial inclusion through educating and empowering consumers, represent the industry before legislative and regulatory bodies and provide thought leadership. For additional information, visit www.ipa.org, or follow us on Twitter @IPAUpdates.
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