Payments

Position

  • ICBA supports the development and evolution of payment systems that are bank-centric, ubiquitous, faster, risk adverse, competitive, more secure, and efficient to help community banks meet the global payment needs of their customers.
  • ICBA supports the Federal Reserve System in its dual role as payment systems regulator and provider/operator of services and urges the Reserve Banks to support the development and evolution of payment systems with new operational roles. The Federal Reserve System should participate in an operating role in faster payments to ensure access and participation among community banks.
  • ICBA strongly supports subjecting non-bank payments providers to the same privacy, security, consumer protection, and other legal and regulatory requirements as banks.
  • ICBA encourages a federal and state regulatory framework for emerging payments such as virtual currencies, virtual wallets, exchange services, and merchant enablers that support these services.
  • ICBA supports rules and standards organizations and the role they play in developing and maintaining payment systems. ICBA urges these organizations to have governance processes which enable and foster community bank participation and support transparent, timely and inclusive rulemaking.
  • ICBA urges policymakers to raise the safe harbor exemption for remittance transfers in Regulation E from 100 to 1,200 transfers made in the previous year to make it more meaningful for community banks. ICBA urges policymakers to make permanent the temporary provision under Section 1073 of the Dodd-Frank Act that permits insured institutions to estimate certain pricing when disclosing remittance fees to customers.

Background

Access

Community bank payment systems access must not be limited through the imposition of anti-competitive and discriminatory pricing or policies, membership requirements, standards, operating rules, or technological barriers. Market power should not be used to force changes that would materially or adversely impact the competitive nature of our nation’s payments system.

Faster Payments

It is critical for community banks to have access to faster and real-time payments to ensure they can offer a faster, more efficient, and more secure bank-centric payments to their customers and communities. ICBA strongly supports the recommendations of the Federal Reserve Faster Payments Task Force to spur industry development of ubiquitous, real-time payments. Core attributes of any real-time payments system should include a simple end-user payment experience, ubiquity, efficiency, inter-bank compensation, and strong oversight by financial institutions. ICBA is a longtime advocate of Same-Day ACH.

Non-Bank Payment Providers

The emergence of non-bank payments providers adds risk and threatens the integrity of the payments system as these providers are not subject to the same safety and soundness and oversight and examination requirements as banks. This lack of oversight places consumers and small businesses using these services at greater risk. Additionally, these non-bank providers should not disrupt or disintermediate the bank-centric payments system. Technologies should be safe and secure, adhere to the same regulations and consumer protections as banks, and enable banks, regardless of size, charter-type or location, to play an active role in the customer relationship.

Federal Reserve System

The Federal Reserve’s ongoing dual payments role as a regulator and a provider of services allows it to maintain efficient, accessible, reliable, and safe payment systems for all financial services stakeholders. The new strategic focus of the Federal Reserve’s Financial Services bodes well for all participants as the industry strives to meet the payments needs of consumers and businesses in a dynamic and innovative commerce environment fueled by the use of smart-phones, tablets, and other mobile devices. This strategy moves the Federal Reserve’s focus from the interbank payments market to the entire payments supply chain to shape the end-user payments experience.

Federal Reserve Operating Role

It is essential that the Federal Reserve participate as a payments operator and service provider to all banks, regardless of size and charter. Beyond settlement capabilities, ICBA sees three possible operational roles for the Federal Reserve. First, the Federal Reserve could serve as an on-ramp to real-time payments, leveraging its connectivity among financial institutions to provide all financial institutions access to real-time payments. Second, the Federal Reserve could serve as an operator for real-time payments. This is a role that the Federal Reserve currently serves for checks, ACH payments, and wire transfers. Lastly, the Federal Reserve could operate a payments directory which could link to financial institutions, as well as to other private-sector payments directories. These roles would be similar to those the Federal Reserve currently plays in providing integrity, safety, transparency, equitable access, and ubiquity among all of the nearly 12,000 financial institutions for checks, ACH payments, and wire transfers. 
 

Virtual Currencies

Virtual currencies offer consumers a new choice of payment method and have the potential to create further new options for consumers, international commerce, and investors in the future. However, many of these options come with great risk for customers and the banks that serve them, as virtual currencies are often used for illicit purposes. The current limited regulation and oversight applied to the virtual currency marketplace and transactions mean that consumers and investors that use or hold virtual currency are exposed to significant risks. ICBA continues to advocate on behalf of community banks to educate policymakers regarding the risks related to virtual currencies.

Digital and Mobile Wallets

Digital and mobile wallets, such ApplePay, MasterPass, and Samsung Pay, offer consumers a means of consolidating their payment card and account information. It is imperative that these wallets evolve in a manner that ensures that customer data is protected, login credentials are never shared, non-banks (software companies, retailers, and phone manufacturers) do not have access to customer account information, and bank-centric payments are accommodated. Digital and mobile wallets should be ubiquitous – connecting all consumers to all businesses – through all financial institutions. They should allow for an open competitive environment and not add unrecoverable costs.

Rulemaking

Given that private sector rules govern the ACH, payment card networks, check clearing houses and the next generation of payments, it is vital for community banks to participate in the rulemaking, operations, and governance of these organization. The rulemaking process should be transparent and ensure that community banks have the opportunity to comment and review comments. Rules should be refined to address new services, technologies, regulatory requirements, and marketplace dynamics. 

Remittance Transfers

The CFPB’s 2013 remittance transfer rule, designed to protect consumers who send money electronically to foreign countries, exempts community banks and others sending fewer than 100 transfers per year. This threshold, which is unreasonably low and forces community banks to manage volume to stay below it, results in fewer consumer options. Additionally, this rule contains a temporary provision that permits insured institutions to estimate certain pricing in disclosures to customers. Since most community banks use open networks and cannot predict with certainty the exact amount that will be received, this temporary provision should be made permanent.  

Staff Contact: Cary Whaley and Rhonda Thomas-Whitley