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FIN to Senators Crapo and Brown: Raise the Bar for Everyone on Data Privacy

March 15, 2019 – Today Financial Innovation Now weighed in with the Senate Banking Committee on data protection policy. In response to a request from Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH), FIN voiced support for Congressional efforts to pass comprehensive national privacy legislation, stating that data protection legislation should be comprehensive and raise the bar for everyone.

Full text of the letter is below and available at http://financialinnovationnow.org/wp-content/uploads/2019/03/fin-crapo-brown-privacy-response-final.pdf

 

March 15th, 2019

The Honorable Mike Crapo, Chairman
The Honorable Sherrod Brown, Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate
534 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Crapo and Ranking Member Brown:

Thank you for the opportunity to submit feedback on data privacy. Financial Innovation Now (“FIN”) is an alliance of leading innovators promoting policies that empower technology to make financial services more accessible, safe and affordable for everyone.[1]

FIN’s members share the Committee’s interest in maximizing data security and protecting the privacy of user information used in offering financial services and products, while at the same time minimizing the potential for fraud in the use of these services and products. As pioneering technology companies, FIN members have been at the forefront of new security capabilities and privacy features. Consumer-facing companies have created features like just-in-time notices or active notices, mobile alerts, granular privacy controls, and data portability; while enterprise and infrastructure companies have enabled similar features for thousands of non-technology companies.

Similarly, technology companies have often been the first to develop and adopt new security practices aimed at mitigating fraud in financial services, such as tokenization of payments, end-to-end encryption, and optional multi-factor or biometric authentication. These companies generally have no business other than their digital business, so maintaining user trust is uniquely critical. Additionally, FIN member companies’ financial products and services are subject to a wide range of state and federal regulatory obligations, as well as oversight from the Federal Trade Commission and the Consumer Financial Protection Bureau.

As the Committee examines various policy approaches to privacy and data security in financial services, FIN believes that data protection legislation should be comprehensive and raise the bar for everyone. Technology and financial services are rapidly becoming indistinguishable. As convergence accelerates, it makes little sense for the United States to continue with a sector-specific approach to data, financial or otherwise. Existing U.S. laws for financial privacy and data protection should be enhanced to encourage innovation in privacy and data security features to prevent fraudulent misuse and data breaches.

FIN supports Congressional efforts to enact comprehensive privacy and data breach legislation. Such legislation should pre-empt state laws; preserve data sharing necessary for enhanced security, authentication and fraud prevention; distinguish direct consumer services (“controllers”) from enterprise services (“processors”) acting on behalf of other businesses; and update relevant provisions of existing statutes to ensure consistent consumer expectations across many different services, or avoid duplicative coverage. Finally, Congress should assess whether prudential regulators are appropriate overseers of industry privacy and security, and consider unifying such oversight through comprehensive legislation.

Thank you for your interest in FIN’s views and we look forward to working with the committee on these issues going forward. Please let me know if I can be of further assistance.

Respectfully,
Brian Peters
Executive Director
Financial Innovation Now

[1] Our member companies include Amazon, Apple, Google, Intuit, Square, Stripe, and PayPal. For more information regarding FIN’s policy priorities and principles, please visit https://financialinnovationnow.org

FIN Member Companies Step Up to Help Workers During Government Shutdown

January 25, 2019 — Today in a letter to House Financial Services Committee Chairwoman Waters, Financial Innovation Now highlighted member company efforts to help workers affected by the federal government shutdown. These efforts include interest free loans, credit workout arrangements, donations to food banks, and other assistance. A copy of FIN’s letter can be found at http://financialinnovationnow.org/wp-content/uploads/2019/01/fin-waters-shutdown-response-letter.pdf

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Leading Technology Companies Call on Federal Reserve to Speed Payments for All Americans

December 14, 2018 — Financial Innovation Now today called on the Federal Reserve to lead the development of real-time payments infrastructure for the modern era, available for all Americans.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“These technology leaders believe that no American should have to wait hours or days to pay bills or keep the lights on. Payments should move at the speed of life, and for many American consumers and small businesses, that means ‘right now’. FIN member companies applaud the Federal Reserve Board for thinking boldly and working to serve all Americans by providing them with a safe, real-time payment system. America cannot realize this vision without the Federal Reserve and currently we are falling behind other nations. FIN member companies look forward to a payment platform that accelerates American ingenuity and innovation, particularly services that will help the financially underserved.”

In October, the Federal Reserve requested input on how it should develop a system for real-time payment settlement. Currently it can take days for payments to finally make it into a bank account. In contrast, FIN member companies have innovated payment networks that allow consumers to make many payments instantly. Constraints in the current payment infrastructure hamper the ability of payment systems to be more broadly accessible and move in real-time.

FIN urged the Federal Reserve to move forward expeditiously and develop a real-time system with innovation in mind. The FIN companies argue that a Federal Reserve real-time payment infrastructure is necessary because:

  • Consumers and small businesses, particularly the underserved, need affordable options, and they have twenty-first century expectations for their money.    
  • Existing payment systems can be a barrier to innovation and access to capital.
  • Other countries are outpacing the United States in adopting real-time payments.
  • Ubiquity requires action by the Federal Reserve, which is uniquely positioned to lay the groundwork for safe, convenient and cost effective real time payments.

FIN is an alliance of technology leaders working together on policies that will help modernize the way consumers and businesses manage money and conduct commerce. FIN members include Amazon, Apple, Google, Intuit, PayPal, Square, and Stripe. FIN’s letter to the Federal Reserve can be found at: http://financialinnovationnow.org/wp-content/uploads/2018/12/fin-fed-real-time-payments-docket-op-1625-final.pdf

Media Contact:
Lauren Greenwood
lauren@financialinnovationnow.org
202-922-6303

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U.S. Faster Payments Council Announced

The Federal Reserve today announced the formation of the U.S. Faster Payments Council (FPC), a new industry forum organized to help promote faster payments in the United States. FIN has participated as a member of the Fed’s Governance Framework Formation Team (GFFT) and commends the accomplishments of this group.

The announcement highlights the FPC’s focus on improving the adoption of faster payments through a collaborative approach that emphasizes inclusiveness and diversity. The FPC is a member-driven organization that is open to all stakeholders in the U.S. payment system. Notably, the FPC’s relatively equal board structure is novel and much needed in payments industry governance. 

Since 2015 FIN has called for real-time payments to be widely available in the U.S. by 2020. The FPC can help achieve that goal.

Payments Industry Leaders Launch U.S. Faster Payments Council
Organization aims to accelerate U.S. adoption of faster payments

CHICAGO, IL – (November 13, 2018) – A key group of payments industry leaders today announced the formation of a newly incorporated organization, the U.S. Faster Payments Council (FPC), to work toward the goal of a ubiquitous, world-class payment system that allows Americans to safely and securely pay anyone, anywhere, at any time and with near-immediate funds availability.

“The industry has clearly signaled that, while our nation’s faster payments system capabilities are rapidly innovating, there’s much to be done to promote ubiquity and faster payments adoption,” said Douglas Berg, Senior Vice President of Payment Industry Relations for Wells Fargo Bank. “We encourage our nation’s payments leaders to lend their voices to the future of faster payments by joining the FPC and sharing their insights and expertise to further this important work.”

The mission, structure and focus of the FPC reflect the broad perspectives of the 27-member Governance Framework Formation Team (GFFT), which developed the framework for the FPC after months of deliberations and industry input. The GFFT’s proposed operating vision for the FPC, published last spring, generated more than 1,000 comments from industry stakeholders across the payment ecosystem. The feedback was instructive in helping the GFFT evolve the framework in a way that best serves the industry’s needs in the early stages of this new payment system’s development.

“The Federal Reserve applauds this next step in the evolution of the U.S. payment system,” said Sean Rodriguez, Federal Reserve Executive Vice President and Faster Payments Strategy Leader. “We commend the GFFT’s efforts to come together and embrace the need for a new organization that will help facilitate efforts to modernize our country’s payments system and allow everyone – providers, consumers, businesses, and more – to benefit from faster payments.”

Geared for Problem Solving

The FPC will be focused on private-sector approaches to solving problems and addressing issues that inhibit adoption of faster payments. Through dialogue, collaboration and education the FPC will channel its resources toward the most pressing challenges and opportunities. Its specific priorities over the next two years include:

  • Supporting adoption of practices that enhance safety and security for service providers and users of faster payments
  • Identifying, developing and supporting principles, guidelines and market practices that will address opportunities and emerging issues in an open and collaborative way
  • Developing an educational and awareness program to foster better understanding of faster payments

“Walmart is pleased to collaborate with other payments stakeholders as the United States transitions toward faster payments,” said Reed Luhtanen, Senior Director, Global Treasury at Walmart. “We fully support the FPC’s objectives and through open dialogue, we look forward to helping inform and drive practices that will benefit our customers and stores through faster, more efficient and securepayments.”

Driven by Shared Goals

As a member-driven organization, the FPC is open to all stakeholders in the U.S. payment system, from payment service providers to businesses and other end users. Its structure, operations and activities are designed to adhere to the FPC’s fundamental principles of inclusiveness, fairness, flexibility,responsiveness and transparency. Through unprecedented diverse representation on the FPC’s Board and open opportunities to serve on committees and work groups, all active members will have a voice in the direction of the work and will be informed by the perspectives of other members.

“At Mastercard, we value the perspectives of all players across the payments industry,” said Andrea Gilman, Senior Vice President, Product Management, Mastercard. “The FPC’s mission is to provide a unique forum for all stakeholders to come together and discuss strategies for developing a faster payments infrastructure that will shape the future of payments in the United States. I encourage all of our customers and partners to participate in this important dialogue.”

Next Steps

Today’s launch of the FPC marks the start of a new member drive as well as a search for an executive to lead the organization. A majority of GFFT members have already committed to being founding members of the FPC and will lead establishment activities for the organization.

“Early Warning is proud to be a founding member of the FPC. We’re eager to work with other payment innovators to remove the barriers to adoption, scale the service offering, and achieve the goal of faster payments ubiquity by 2020 through collaboration and education,” said Lou Anne Alexander, Group President of Payment Solutions, Early Warning Services.

Sponsor* and Founding members of the FPC as of today’s release include:

American Bankers Association (ABA)
Accredited Standards Committee X9
Bankers’ Bank
Commerce Bank
Corporate One Federal Credit Union
Early Warning Services
Icon Solutions
Jack Henry & Associates Inc.
James Angel, Ph.D., CFA
JPMorgan Chase Bank
Mastercard
NACHA – The Electronic Payments Association
North American Banking Company*
Open Payment Network
Reinvestment Partners
The Bankers Bank
The Clearing House
SHAZAM*
Tiller Endeavors
Visa Inc.*

Walmart
Wells Fargo Bank

For additional information on the FPC, including how to join, organizations are encouraged to visit: www.FasterPaymentsCouncil.org

About the Governance Framework Formation Team

The Governance Framework Formation Team (GFFT) is a short-term work group of 27 industry participants established by the Faster Payments Task Force in mid-2017 and facilitated by the Federal Reserve. The recommendation to develop and establish a faster payments governance framework was the leading directive of the task force, as noted in its final report published last July. For more information on the Governance Framework Formation Team or its predecessor, the Faster Payments Task Force, go to FedPaymentsImprovement.org or FasterPaymentsTaskForce.org.

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FIN Welcomes Regulatory Program for Modern Consumer Disclosures

October 10, 2018 – Financial Innovation Now today called on the Bureau of Consumer Financial Protection to promote better consumer disclosures through the latest technology.

In comments to the Bureau’s proposed changes to the Trial Disclosure Program, FIN states:

“FIN supports and is encouraged by the Bureau’s efforts to make the Trial Disclosure Program more clear and effective, simply because technological change can provide new methods of disclosure that enhance consumer protection … [w]hether it be via smartphone or voice-enabled digital assistants, consumers are taking advantage of many different technologies to more easily access their finances….”

A copy of FIN’s comment is available here: http://financialinnovationnow.org/wp-content/uploads/2018/10/fin-trial-disclosure-program-cfpb-10-10-18.pdf

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FIN Joins Industry Groups Urging Congress to Pass IRS Modernization Legislation this Session

October 2, 2018 – Financial Innovation Now this week joined a coalition of industry organizations calling on Congress to pass legislation to modernize the Internal Revenue Service (IRS) to improve small businesses’ access to capital.

The organizations, including the U.S. Chamber of Commerce, the Marketplace Lending Association, the Consumer Bankers Association, and Accion, sent the following letter to a bipartisan group of Congressional Members.

October 2, 2018

Re: IRS Modernization – Please Pass S. 1958 / H.R. 3860 / H.R. 5444 This Session To Aid Small Businesses

Dear Chairman Hatch, Ranking Member Wyden, Chairman Crapo, Senator Portman, Senator Cardin, Senator Booker, Chairman Brady, Ranking Member Neal, and Deputy Whip McHenry,

We are a diverse coalition of organizations writing in appreciation your strong support for technology modernization at the Internal Revenue Service. You have all been leaders on this issue, which has great potential ensure that taxpayer information is handled more securely and efficiently for the digital age.

We believe that one key area of IRS modernization, S. 1958 and H.R. 3860, the IRS Data Verification Modernization Act of 2017, can bring added security while also helping improve the economy. The IRS data modernization provisions of S. 1958 and H.R. 3860 are also now included in H.R. 5444, which passed by bipartisan a vote of 414-0 and is awaiting Senate action. If signed into law, this bill would help to deliver critically needed access to capital for small businesses and the Main Street economy, while making the IRS third-party income verification process more secure for American taxpayers. As you know, an upgrade to the IRS’s existing data verification program could have profound benefits. In short, replacing the IRS’s current data transfer delays with an up-to-date, real-time system, could provide the country with:

  • Increased access to capital and financial inclusion – By making it possible for tax return data to be accessed instantly as part of a loan application process, many more small businesses could be recognized as creditworthy. This would especially benefit the underserved borrowers overlooked because of their lower credit scores, but whose tax data and income would indicate creditworthiness.
  • Lower prices for borrowers – The addition of rich tax data, delivered securely in real time, would help credit models become more accurate, leading to lower prices.
  • Easier borrowing process – An instant process would reduce paperwork required of busy business owners. They would receive loan proceeds faster, eliminating the current system’s days or weeks of delay.
  • Safer financial system – Instant access to this data could significantly increase the rate of income verification, enable better informed and more responsible underwriting, and reduce the risk of document fraud, further contributing to safer loans and lower costs.

If the Senate can pass any IRS modernization package this Congress with sufficient time remaining before January, we believe a perfected form of the bill can be finalized in a conference with H.R. 5444. With such benefits to small businesses, and strong bipartisan, bicameral support, it would be a great loss if this issue were left aside for a future Congress to grapple with. We urge you to find a way to pass this legislation before this Congress ends.

We thank you again for your leadership.

Sincerely,

The United States Chamber of Commerce
The Marketplace Lending Association
The Consumer Bankers Association
California Association of Micro Enterprise Organizations
Opportunity Fund
Accion
Financial Innovation Now
Electronic Transactions Association
The Responsible Business Lending Coalition
The Innovative Lending Platform Association
Woodstock Institute
Greenlining Institute
California Reinvestment Coalition
The Equipment Leasing and Financing Association
Craft3
Small Business Majority

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FIN Welcomes OCC Fintech Charter Announcement

July 31, 2018 – The Office of the Comptroller of the Currency (OCC) today announced it will begin accepting applications for national bank charters from financial technology firms. FIN has supported the OCC’s two-year effort to foster a national approach to the regulation of financial services.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“As outlined by Treasury earlier today, the regulatory landscape must adapt and grow along with changes in technology and customer preferences. The OCC’s decision to issue special purpose bank charters to financial technology companies is a recognition that the current regulatory environment must evolve. FIN appreciates the OCC’s affirmation of a national regulatory approach to technology, and while any one FIN member may not seek a special purpose charter, FIN nonetheless supports the OCC’s leadership and vision in driving this regulatory discussion. We look forward to working with the administration and Congress on multiple national regulatory paths to market.”

The OCC’s announcement today was accompanied by a policy statement clarifying its chartering authority and a supplement to the OCC’s licensing manual. The announcement followed Treasury’s release of an extensive report on the regulation of financial technology, which is available here.

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FIN Statement on U.S. Treasury Report on Financial Technology; Leading Innovators Praise Policy Goals

July 31, 2018 – The U.S. Department of the Treasury today released a report outlining a number of policy proposals to modernize federal financial services regulations. The Treasury report aligns with many of the policy recommendations of Financial Innovation Now, such as streamlined federal rules, open data, payment innovation, and tech-neutral security.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“Financial Innovation Now advocates for smart federal policies that promote technological innovation in financial services, and we believe the Treasury Department’s report is a strong step towards modernizing antiquated financial regulations. From secure mobile payments to fast and accessible credit, FIN member companies are empowering consumers and small businesses with helpful financial tools. We look forward to working with Congress and federal financial regulators on these necessary policy updates.”

The Treasury report is available here.  Today’s report was in response to Executive Order 13772, issued by the President on February 3, 2017, which calls on Treasury to identify laws and regulations that are inconsistent with the administration’s Core Principles for financial regulation.

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U.S. Report on Financial Technology – Key Takeaways

The U.S. Government Accountability Office (GAO) recently released a report on the regulation of financial technology. The report, “Financial Technology: Additional Steps by Regulators Could Better Protect Consumers and Aid Regulatory Oversight,” fulfills a request from Congress to provide details and recommendations on how to modernize the financial regulatory environment for technology in the United States. The GAO’s findings focus on four areas of financial technology: payments, lending, wealth management and financial advice, and distributed ledger technology. The report discussed several key findings, including that the U.S. regulatory structure poses some challenges to financial technology firms. It also found that financial technologies provide benefits to consumers, leaving them more satisfied than services offered by traditional providers. Below are three key takeaways:  

Security

Fintech payment services provide increased security for users. Mobile devices contain additional security features, like fingerprint readers, facial recognition, and additional password requirements. These features make it increasingly difficult for bad actors to obtain consumers’ financial information. If nefarious actors do gain access to a device, there is the option to remotely disable that device and prevent personal information from being manipulated. Furthermore, as noted in the report, while credit and debit transactions have traditionally “transmitted sensitive information that can be hacked and used to make fraudulent transfers, fintech providers’ mobile wallets generally replace this sensitive information with randomly generated numbers that mitigate the risk that transaction information can be used fraudulently (tokenization)” (pages 14 and 15).   

Convenience and Consumer Satisfaction

While improved security may be the largest incentive for using digital payments, the convenience factor cannot be ignored. Non-bank digital payments allow users to easily and quickly transfer money, make payments, obtain loans, and access information from all of their financial accounts on one dashboard. Traditional banking systems tend to operate within a limited time frame, but digital options operate 24/7 in real-time making them more accessible to users (page 13).

Payment innovations not only provide convenience for consumers, but also save them money. The report details several ways in which fintech providers are lowering costs for consumers, including that many providers are not charging fees for payments (page 13).

Users’ overall satisfaction with new payment technologies is demonstrated by the available regulatory data. Compared to traditional providers, consumer complaints against fintech firms is modest. The GAO’s analysis of the CFPB’s consumer complaint database showed that “the number of published complaints submitted against several prominent fintech firms from April 2012 through September 2017 included in this database was generally low, when compared to select large financial institutions” (page 39).

Regulatory Environment

The state-by-state regulatory approach for money transmission is harming innovation and slowing access to new payment services. As the report notes, “complying with fragmented state licensing and reporting requirements can be expensive and time-consuming for mobile payment providers and fintech lenders” (page 45). Due to this regulatory barrier, fintech innovators are avoiding the U.S. and taking their business elsewhere. GAO cites one example of a fintech startup that “spent half of the venture capital funds it had raised obtaining state licenses,” and “that some firms may choose not to operate in the United States.” Furthermore, firms have commented that “identifying the applicable laws and how their activities will be regulated can be difficult” (page 45).

Meanwhile, as the report explains, “regulators abroad have taken various approaches to encourage fintech innovation….establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use “regulatory sandboxes” that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators” (page 50). The report demonstrates that the U.S. needs more proactive leadership from policymakers to encourage and attract innovation.    

Notably, the report does suggest that “specialized operating charters offered by federal and state banking regulators may help fintech firms more easily operate nationwide…” but state regulators are blocking these pathways to the market (page 47).

As the GAO report concludes, the emergence of financial technologies has provided numerous benefits to consumers, including the convenience of reliable financial services.

 

Industry Group Releases Faster Payments Governance Framework Draft, FIN Urges Inclusive Approach

April 24, 2018 – Under leadership of the Federal Reserve, an industry group today called for public input on a draft proposal for a new payments governance organization that aims to facilitate faster payments in the United States. FIN is a member of the Fed’s formation team that developed today’s draft.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“For the American family trying to pay bills on time, or the entrepreneur trying to purchase inventory, it should be a given that payments happen in real-time, especially in our increasingly digital economy. If industry is to achieve real-time payments on its own, it will require a modern payments governance organization, one with equal representation of all affected stakeholders and a meaningful capacity for governance. FIN is hopeful that many non-bank innovators engage the Fed’s comment process to push for an inclusive organization. FIN commends the Fed’s leadership and looks forward to ongoing collaboration through the GFFT process.”

Stakeholders can review the draft governance proposal and submit feedback via an online survey now through June 22 at FedPaymentsImprovement.org.

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