Bad News for Banks?

bankThere were two big announcements in September that seemingly added to the dour outlook for banks:  Apple Pay and Walmart’s Checking Accounts.  But, despite previous headlines about new financial service products and services putting an end to banks, the prospect that banks are to become obsolete will not come true–at least not in the near future.  The outlook instead seems that the bigger fish will continue to play a big part in everyone’s everyday financial doings.

For example, Apple Pay has teamed up with some big players: AmEx, BofA, Wells, Chase.  Bank of America and Wells Fargo can tout they are providing easier access for its customers, without having to reinvent the wheel themselves.  A win-win for big banks.

A prepaid card leader, Green Dot, made a huge splash last week with the announcement of another partnership with Walmart–checking accounts.  Walmart ditched their efforts to become bankers bank in 2007.  Instead, they brought on the Walmart Money Card and American Express’ Bluebird, offer the ability to quickly reload a variety of prepaid cards with Rapid Reload, check cashing, bill pay, money orders–giving their customers the ability to take care of all their banking needs in-store–without holding a bank charter themselves.  Another win for this big-box retailer, and a growing leader in “alternative” banking.

 

 

 

 

 

 

Who’s Lending Anyway?

Young woman is looking through a binocularsIn commemoration of Payments Law’s one year anniversary, I’ve taken a slight departure in this post by quickly summarizing how people come up with the capital to jumpstart their companies.

Where do most (non-tech) entrepreneurs go?

Mostly likely, NOT banks:  According to the Wall Street Journal–“The number of loans for $1 million or less held by banks is down about 14% to 23.5 million since 2008. In nearly one-third of all U.S. counties, small-business lending remains below 2005 levels, estimates PayNet Inc., a Skokie, Ill., tracker of loans by banks, corporations and alternative lenders such as finance companies….Some analysts are encouraged by recent signs of a lending uptick by small banks, which often focus on small businesses. In July, the total amount of commercial and industrial loans held by small U.S. banks rose 11% from a year earlier, according to Moody’s Analytics.”

Those numbers are still very low.

Not surprisingly, “alternative” financing sources have met great success as SMBs clearly needed other sources to obtain capital.  Here’s a short list of various alternative lenders:

Family/Friends

P2P: Prosper, Lending Club

Crowdfunding:  KickStarter

Online Payments Companies: Kabbage, PayPal Working Capital

CDFI: Opportunity Fund (only in CA) but there are CDFIs throughout the country

It’s true that the regulations that these alternative lenders may differ from traditional lenders, and may be providing loans at less competitive rates than traditional lenders.  But it seems, the tide is turning and many entrepreneurs are looking first to these non-traditional lenders.  Which begs the question: who is taking the the real long term risk: banks or borrowers?

 

 

 

Payments for Parents

billpayimgI thought I was finished with my checkbook.  But, I have discovered that having a school aged child has brought many required a multitude of off-line payments: class fieldtrips, sports teams, lessons, babysitters.  This is coupled with the need to make a payment accepted by most, preferably off-line.  Which places me in a position to pay by paper check (!!) as I rarely carry enough cash to make a payment. This is kind of embarrassing given the line of work I am in, so I have tried to look into other options that might be easily adopted by others to move money to a variety of individuals: teachers, parent groups, individual parents, coaches, and small organizations.

What options are there right now?

Square Cash:  Square allows you to send and receive a payment if you have A) an email address and B) a debit card linked to a bank account.  There are no fees to send or receive a payment.  Payments are processed within 2 business days.  Payments over $250 will require additional identification.  *One caveat, if you are a resident of Hawaii, you’re out of luck.  You can’t use Square Cash.

Google Wallet via Gmail: Google Wallet’s P2P service requires a gmail address (although you will be required to login with a Google Wallet Account).  Google Wallet provides more funding sources (credit/debit/prepaid card/bank account).  There is a fee of 2.9% the transaction amount for the sender and the receiver if the funding source is a credit card or a debit card (not if it’s from a bank account).  Payments are processed up to 3 business days.  You may be required to additional information based on the funding source (SSN, address, all that KYC stuff)

Of course, there’s PayPal (but interestingly, I’ve never been asked to make a payment using PayPal in my parental capacity–why is this?), or prepaid cards to pay a babysitter (not exactly convenient). But, realistically, it seems like none of these newer payment methods will take off unless most people will be required to pay a fee to deposit a check or cash.

CFPB Looks for Comments on Mobile Technology & the Underserved

looking-through-binoculars-future-predictionsIn mid-June CFPB issued a notice inquiring about mobile apps geared toward the financially underserved.  Here’s a sampling of the questions the agency is seeks comment on:

(1) What are some of the ways in which consumers use mobile technology to access financial services? What are some of the benefits to consumers of enhanced access via mobile?

(2) How would making access via mobile differ from or improve overall access compared to only accessing financial services through an online channel?

(3) Based on your experience, what percentage of customers access accounts at financial institutions via mobile? Has there been any research that sheds light on level of use by income strata, age, or other demographic factors?

I was interviewed by Mobile Payments Today on the topic:

“There is no question that there is a great need to provide financially underserved consumers with fair and robust products and services,” she wrote in an email. “Right now, all bets are on mobile technology due obviously to the ubiquity of mobile devices, particularly for low- to moderate-income consumers, and the number of companies and new entrants is enormous.

“So, it isn’t surprising that this is an area that the CFPB is interested in, or interested in enough to make a formal request for information. It also isn’t surprising that segments of the industry will be nervous that regulations will soon come next, but in my experience with the CFPB, it is likely the agency is conducting its due diligence in gathering information from all interested and involved stakeholders and will likely be taking its time in figuring out how best to address any issues or concerns that have been or might be raised.”

If this topic is of importance to you, make sure to submit your comments by the deadline, Sept 10, 2014.

 

 

Suggested Changes to Reg P (GLBA)

data-breach1As a product of the CFPB’s Streamlining Initiative to reduce unnecessary or unduly burdensome regulations,” the CFPB announced a proposal in May to change the requirements for GLBA notices under certain circumstances.

A quick reminder on what Reg P is:

“Regulation P, implementing provisions of the Gramm-Leach-Bliley Act, requires financial institutions to provide annual privacy notices to customers describing the institution’s information sharing practices and explain how a consumer can opt out of the sharing of their information when applicable.”

The proposed changes would allow “financial institutions” (FI) under the GLBA to use the alternate (electronic) method of delivering annual privacy notices if:

(1) The FI doesn’t share a customer’s nonpublic personal information (NPI) with nonaffiliated third parties that trigger opt-out rights;

(2) The FI does not include on its annual privacy notice an opt-out notice under section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (FCRA)

(3) The FI’s annual privacy notice is not the only notice provided to satisfy the requirements of section 624 of the FCRA;

(4) the information included in the privacy notice has not changed since the customer received the previous notice; and

(5) The FI uses the model form provided in the GLBA’s implementing Regulation P.

The proposed alternative would allow FIs to provide a “clear and conspicuous statement” on a notice or disclosure already sent to the consumer at least once a year that provides the consumer with the following information: that there have been no changes to the privacy policy and that the privacy policy can be accessed on the FI’s website or provided by mail by requesting a copy by calling a toll-free number.

But, generally, paper notices would still need to be mailed if there are changes in the FI’s privacy practices OR if the FI engages in information-sharing activities where a consumer has an opt-out right.

As the CFPB suggests, these changes may benefit both industry and consumers alike. It may save financial institutions large sums of money, as generating the notices, paper and snail mail isn’t cheap.  The question is whether it will make a significant difference to consumers.  Surely I can’t be the only one admits to quickly recycling my notices…

The deadline for comments is July 14, 2014.