Tag: Payments

Citizens’ payments leader to speak at Bank Automation Summit U.S. 2024 | Bank Automation News

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Maria Mason, enterprise product manager at Citizens Bank, will speak at Bank Automation Summit U.S. 2024 about strategies for automating real-time payments (RTP).

Bank Automation Summit U.S. 2024 takes place March 18-19 at the Omni Nashville in Nashville, Tenn., and brings together industry experts to discuss innovation in real-time payments, AI, RPA and more.

View the full agenda for Bank Automation Summit U.S. 2024 here.

Mason will speak Tuesday, March 19, at 3 p.m. CT on the panel, “Strategies for automating real-time payment processes.”

Courtesy/Citizens

She joins Minal Gupta, senior vice president of operations at $10.7 billion Star One Credit Union, to discuss how financial institutions can innovate in RTP and select the right technology provider.

The $222 billion Citizens Bank continues to innovate within its payment business — including with Citizens Pay, the payments arm of Citizens Bank; it expects to add features such as contactless payments, digital wallets and buy now, pay later capabilities, Christine Roberts, president of Citizens Pay and executive vice president of the bank, previously told BAN.

The bank is also looking toward AI to enhance customer experience and drive efficiency, the bank said in its fourth-quarter earnings call last month.

In Q4, Citizens reported total revenue of $2 billion, down 10% year over year, and 17,570 full-time employees, down 7% YoY, according to its earnings reports.

Learn more and register here for Bank Automation Summit U.S. 2024.

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Vaidik Trivedi

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February 7, 2024
Fiserv payments revenue up 3% to $1.8B | Bank Automation News

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Fiserv saw an increase in payments revenue during the fourth quarter as its financial institution clients looked to join new payment rails and grow deposits. Payments revenue during Q4 increased 3% year over year to $1.8 billion, according to Fiserv’s earnings supplement. “Our discussions with banks and credit unions indicate that they remain poised to […]

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Whitney McDonald

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February 6, 2024
Sunbit taps Citi for debt warehouse facility | Bank Automation News

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Buy now, pay later provider Sunbit has raised $310 million from Citi and Ares Management credit funds for a debt warehouse facility. The company aims to use the money to deepen its penetration in automotive, dental and health care industries, co-founder and Chief Executive Arad Levertov told Bank Automation News. “We are in 10,000 car […]

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Vaidik Trivedi

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January 31, 2024
P2P market to reach $6.2B by 2028 | Bank Automation News

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The peer-to-peer payments market is growing as consumer demand ticks up and new competitors enter the space. P2P payment market size is expected to reach $6.4 billion by 2028, according to a January report by market research group The Business Research Co. In fact, 81% of banked U.S. consumers have P2P accounts, according to a […]

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Whitney McDonald

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January 29, 2024
Amex to prioritize growth in 2024 | Bank Automation News

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American Express plans to invest in product innovation in 2025 to keep up with anticipated growth in 2024. “We currently have plans to refresh around 40 products globally next year,” Chief Financial Officer Christophe Caillec said today during the card giant’s fourth-quarter earnings call. The focus on products is designed to keep up with client […]

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Vaidik Trivedi

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January 26, 2024
Visa teams up with Meta for P2P payments | Bank Automation News

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Visa extended partnerships and made new connections during its fiscal first quarter as it looked to expand its reach, develop new use cases for its offerings and push its peer-to-peer payments capabilities. “We remain obsessed about serving our customers, including traditional bank partners, neobanks, fintechs, wallets, sellers, acquirers and everyone else,” Chief Executive Ryan McInerney […]

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Whitney McDonald

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January 26, 2024
This Critical Mistake Is Slowing Down Your Operations — But There’s 1 Simple Tool You Can Use to Change That. | Entrepreneur
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Opinions expressed by Entrepreneur contributors are their own.
Picture this: you’re a business leader at the helm of a thriving company. Your days are packed with making critical decisions, steering your team toward success and ensuring customer satisfaction. Amidst this, the last thing you want is for your purchase-to-pay (P2P) process to become a bottleneck — slowing down operations, frustrating your team and potentially harming vendor relationships. A convoluted P2P process can not only waste valuable time but also lead to errors and financial losses — a risk no entrepreneur can afford.

Now, picture a simpler, more efficient purchase-to-pay system. One where invoice processing, supplier management and payment processing are seamlessly integrated. Imagine the ease with which your team could operate, the time saved that could be better spent on strategic initiatives, and the reduction in errors that could translate to significant cost savings.

This is not just about operational efficiency; it’s about creating a competitive edge in an increasingly demanding business environment.

Understanding what makes for a good P2P process is crucial. A good P2P process can mean the difference between a financial year spent firefighting operational inefficiencies and one where you can focus on growth and innovation. In a world where business agility is paramount, can you afford to overlook the importance of a streamlined purchase-to-pay process?

Related: 3 Secrets to Streamlining Your Accounts Payable Process

In my 23 years working with financial systems, one of the evergreen truths I’ve witnessed again and again is the fact that simplicity in processes benefits everyone. Simplicity is borne out of clarity of vision, and it begets quality of output.

When implementing P2P automation, integrating numerous specialized tools — like one software for invoice processing, another for supplier management and another for payment processing — can lead to a disjointed and inefficient system. Instead of a streamlined process, businesses often find themselves navigating a complex web of incompatible platforms, leading to more confusion and inefficiency. Here are just a few reasons why simplicity is the key to a truly successful Accounts Payable process from every perspective.

1. From a user experience perspective: The user experience — both on the internal side of a process and on the customer side — is central to the successful use of any kind of software. Streamlining software design often enhances its usefulness for the people who use it daily. A platform should be intuitive to navigate, as this allows it to be accessible to a broader range of people, which in turn enhances user satisfaction, customer retention and engagement. Conversely, juggling multiple apps to fill in the gaps puts more pressure on users to quickly learn an increasing number of interfaces, which is inefficient from both a time and cost perspective.

2. From a safety and accessibility perspective: When it comes to invoicing and similar processes, sometimes the fewer hands required, the better. Ease of use is paramount in maintaining an operative system that is safe and secure. When users have a clear sense of how to use a given software, processes are more straightforward and self-directed, which can lessen the incidence of human error and oversight.

3. From an adaptability perspective: Excellent software takes complex integrations and API connections and creates simple, seamless integrations for the end user. Remaining flexible and responsive to the new tools, frameworks and solutions offered by technological innovation is crucial to remaining relevant as a software provider.

4. From a cost perspective: When a company relies on multiple software architectures with numerous interdependencies to run processes, the cost of maintaining and supporting these systems is often considerable. Unpretentious and succinct software is typically less expensive to implement, test and maintain (and often achieves the desired results with fewer bugs as well) due to only having to pay for one comprehensive solution vs multiple specialized ones. Problems are easier to identify and attend to, saving organizations precious time and creative energy without sacrificing the essential process backbone.

Why do we create new software tools and solutions in the first place?

When selecting a P2P or AP automation solution, it’s important to keep some distinctions in mind. There are three major categories on offer that companies must consider.
- Generalist solutions: These are versatile and can handle a broad range of accounting tasks. However, they may lack deep specialization in any one area. An example of a generalist solution is a well-established ERP (Enterprise Resource Planning) software application like SAP or Oracle. These systems integrate various business processes but may not offer the depth of features found in more specialized tools.
- Hyper-specialized solutions: These solutions offer a high level of expertise in a specific area of the P2P or AP process. For example, PayPal or Stripe could be considered hyper-specialized solutions focusing on online payments. These platforms provide advanced features and capabilities specifically for handling online transactions, but they might not address other aspects of the P2P or AP process.
- All-in-one Solutions: These solutions provide comprehensive coverage of the entire P2P or AP process, combining generalist breadth with specialist depth, and offering end-to-end capabilities from procurement and invoice management to payments and analytics. These solutions are designed to manage the entire process seamlessly, offering a high level of expertise across all stages.
Related: 8 Tips for Setting Up a Killer Invoicing System That Always Gets You Paid

Finding the right balance between expertise and end-to-end scope to secure ROI and TCO – and a solution that optimizes user experience as well – is the key to accounts payable automation success. Truly brilliant solutions bring order and efficiency into areas of complexity and confusion thanks to their razor-sharp, “simple” elegance.

When it comes to the accounts payable process, the best way to improve people’s experience is to make the process as comprehensive and intuitive as possible. Business owners usually have enough on their minds as is, and they don’t need a thousand and one options to choose from when it comes to running the essential elements of their businesses.

It turns out you don’t need countless tools to create something outstanding that satisfies everyone; you just need the right ones added at the right time. The more streamlined the AP automation process, the better the outcome.
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Francois Lacas

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January 25, 2024
Mastercard, TCH extend RTP collab | Bank Automation News

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Mastercard extended its collaboration with The Clearing House today to allow customers and businesses to use real-time payments. Mastercard will be the exclusive instant payments software provider for The Clearing House’s (TCH) RTP network, according to a news release from Mastercard. TCH’s RTP network has been gaining traction since the launch of FedNow, with more […]

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Vaidik Trivedi

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January 24, 2024
Synchrony to expand payments offerings, operations in 2024 | Bank Automation News

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Synchrony Financial is expanding its distribution network through acquisition and additional product offerings in 2024. The Stamford, Conn.-based company “continued to diversify our programs in 2023, broadening the utility of our offerings and extending our reach,” President and Chief Executive Brian Doubles said today during Synchrony’s fourth-quarter 2023 earnings call. Synchrony is working toward providing […]

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Whitney McDonald

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January 23, 2024
Fintech Klarna CEO signals IPO in U.S. may happen ‘quite soon’ | Bank Automation News

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Klarna Bank AB, the Swedish fintech that was once Europe’s most valuable startup, may soon launch a stock market listing in the US, according to Chief Executive Officer Sebastian Siemiatkowski. “It’s very likely that this is going to happen quite soon, but there are no official dates,” he said in a video interview with BNN Bloomberg in […]

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Bloomberg News

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January 23, 2024
How Apple's new payment fees portend more legal fights

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Apple’s payment policies face several legal and regulatory challenges.

Apple’s long legal battle with Epic Games over app store checkout policies has entered a new phase after Apple said it would charge a commission of up to 27% for non-Apple payment providers, a move that immediately drew threats of fresh legal action.

Apple’s new policy for developers using non-Apple payment processors for app store transactions follows an earlier policy that required developers to use Apple’s payment system, with an interchange-style fee of up to 35%. Apple announced the new policy last week, around the same time that the U.S. Supreme Court declined Apple’s appeal of lower-court rulings in the Apple/Epic case that required Apple to open App Store payments to outside processors.

The legal fights are playing out while Apple faces pressure from regulators in Europe, the U.S. and elsewhere who claim the technology company has too much control over how people access and use Apple to shop and make payments via Apple’s digital wallet.

At stake is how much control Apple can exert over transactions, and how competitors and banks can expand their ability to offer rival services directly on Apple’s devices. Apple would see a material income stream for them if it captures even a portion of the transactions triggered by activity on its platform, and it is another way to envelop its customers within the “Appleverse,” according to Stewart Watterson, a strategic advisor for Datos Insights.

“It can also be seen as Apple collecting a gate fee to their app developers who use other payment providers,” Watterson said. “Some would see this as Apple fully leveraging the platform that they have built. Others would see this as an unfair monopoly worthy of an antitrust suit. Only time and the courts will tell.”

Epic pushback

Epic Games immediately cried foul over the new double-digit fee, with Epic CEO Tim Sweeney issuing a series of social media posts contending that the 27% fee “kills price competition. Developers can’t offer digital items more cheaply on the web after paying a third-party payment processor 3-6% and paying this new 27% Apple Tax.” Sweeney said Epic will “contest Apple’s bad-faith compliance plan in U.S. District Court.”

Spotify also criticized the new fee, saying Apple has demonstrated “that they will stop at nothing to protect the profits they exact on the backs of developers and consumers under their app store monopoly.” Apple did not provide comment for this article. In the past Apple has said that payment fees fund security and protection from other processing risks.

While Apple’s battle with Epic has drawn lots of media attention over the past four years, Epic has been in court with Google over its app store payment policies.

The outcomes of the two cases thus far have been different. A U.S. court ruled Google was violating antitrust law by requiring developers to use its internal payment system, and was ordered to open its checkout to other payment providers. Apple was ordered to give access to third-party payment systems, but was not found to be in violation of antitrust law.

“Epic won a lot more of what it was demanding from Google, and that creates a disparity in treatment that Epic will want to resolve,” said Aaron McPherson, a principal for AFM Consulting “The appeals process for Google is just beginning, and will probably end up again in the Supreme Court. It may be that the Supreme Court declined to hear the case because it knew about the Google case, and wanted to wait for it to make its way through the appeals courts.”

More than games

Apple’s battle with Epic is just one of many legal and regulatory battles that Apple faces globally over its payment policies.

The U.S. Department of Justice is finishing an investigation examining Apple policies that give it control over how people use the tech giant’s devices. This includes Apple’s policies governing Apple Pay and how iPhones block outside parties such as banks from offering mobile payment apps for iPhones.

In Europe, Apple late last week offered to provide external access to contactless payment technology, which would potentially enable third-party mobile wallets to offer payments directly on iPhones. The European Commission has said Apple’s control over access to payment apps for iPhone users restricts competition.

If Apple’s ecosystem were to open to outside payment providers in the U.S. or elsewhere, it would create more competition, but analysts have said Apple would still maintain an advantage, since it would be easier for Apple to offer a superior user experience on its own devices.

The fee battles are similar to the arguments around card interchange, but Apple is the only network provider, according to Aaron Press, research director of worldwide payment strategies for IDC.

“Opening the system only to charge an equivalent fee seems to be analogous to an embedded payment system charging the full fee for accepting a cash transaction,” Press said.

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John Adams

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January 21, 2024
Guide to Choosing a Credit Card Processor for a Small Business | Entrepreneur
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Opinions expressed by Entrepreneur contributors are their own.
When it comes to spending money, cash is no longer king for most shoppers. The majority of consumers prefer using a debit or credit card to make their purchases. This means that being able to accept these forms of payment is critical for businesses today.

This guide will walk you through how to choose the best credit card processor from the many options available on the market, including information on costs, processor types, and what factors you should consider.

What is credit card processing?

When a customer makes a purchase with a debit or credit card, the processor acts as the go-between for the customer’s bank account and the merchant’s bank account. Although the process takes only a few moments, it involves a complex sequence of steps for the credit card processor, the customer and merchant’s respective banks, and the credit card network. The credit card processor’s role includes security verification, routing the transaction and acting as a clearinghouse for funds.

Who needs credit card processing?

Given that the majority of consumer purchases are made with debit and credit cards (and an ever-shrinking percentage made with cash), the vast majority of small businesses must provide a way for customers to pay with cards. Most credit card processors provide several methods for accepting payments. Consider these examples of credit card usage in action:
- A brick-and-mortar convenience store must use a full-service register to accept credit card payments via swipe, chip, or tap.
- Restaurant servers can use a handheld point-of-sale (POS) terminal to instantly accept card payments right at the customer’s table.
- E-commerce stores need the ability to accept credit card information via an online form and checkout technology.
- A restaurant that takes orders over the phone needs a virtual terminal to enter credit card payment details manually.
- Small-business owners at venues, such as craft markets or trade shows, can use a card reader paired with a mobile device to accept payments while on the go.
How much does credit card processing cost?

It’s important to understand the differences in pricing between credit card processing and other types of business services. The majority of credit card processors employ either interchange-plus pricing or flat-rate processing or a combination of both.

Interchange-plus pricing is when the credit card processor takes a small percentage of each sale, along with a modest fixed fee. The transaction percentage can vary, ranging from approximately 0.29% to more than 3.5%. The fixed fee may be as minimal as a few cents or escalate to 25 cents or more. For some businesses, this fee structure is advantageous because there are no upfront costs. However, it may be less workable for low-margin businesses.

Meanwhile, flat-rate pricing entails paying a fixed monthly subscription fee for unlimited credit card transactions. While this model eliminates concerns about the credit card processor cutting into revenue, it may pose a financial challenge for fledgling businesses due to high monthly fees. Flat-rate prices typically range from $59 to $199 monthly and are often accompanied by high fixed fees on a per-transaction basis.

Additionally, some credit card processors impose incidental and recurring charges, such as Payment Card Industry (PCI) compliance fees, payment gateway fees, network fees, monthly minimum fees and statement fees. Business owners are strongly advised to review the terms of service carefully before committing to any processor.

Furthermore, it’s important to note that specialized POS hardware is required to accept credit cards through swipe, tap or chip methods. While some credit card processors offer free hardware, this path usually involves entering into a contractual agreement. Note also that certain processors provide proprietary POS equipment for purchase while others rely on third-party vendors for their equipment.

What are the benefits of credit card processing?

The main benefit of accepting credit cards is the massive positive effect on sales. The majority of purchases are made with cards and consumers are increasingly going cashless. For businesses that operate primarily online, the ability to accept credit cards is an absolute necessity. Besides the obvious, credit card processing offers many other benefits:
- Increased safety: Many businesses have done away with cash payments entirely and only accept payments by card. This helps protect customers and employees by removing the incentive for criminals to target the business during a robbery.
- More efficiency: A busy small business, such as a restaurant, can process more sales without worrying about cash payments and making change.
- Better data management: Most credit card processors include software that collects and organizes your transaction data. You can gain insight into your business by generating digestible reports and summaries of your sales data.
- Streamlined accounting: Some credit card processors integrate directly with popular accounting software programs, such as QuickBooks and Xero, allowing you to import data easily.
- Take payments anywhere: With credit card processing, you can accept payments remotely via emailed links, quick response (QR) codes, hosted web pages, and more.
What are the different types of credit card processing equipment?

To accept credit cards, you will need a device or program for inputting credit card information at the POS. Both physical devices and digital solutions are available:
- Mobile reader: These devices pair with a smartphone so that you can accept payments while on the go.
- Handheld terminal: Often used in restaurants, handheld terminals are self-contained devices that often print receipts.
- Register: These fixed POS devices are found at the checkout or behind a restaurant counter. Typically, these are the most expensive options for business owners but they also pack the most features.
- Virtual terminal: With a virtual terminal, you can enter credit card information manually into a credit card processing app.
- Online checkout: E-commerce customers use checkout forms to enter credit card information for online purchases.
What are the key features to look for in credit card processing?

Whatever processor you choose should have a few key features. Card acceptance, security, hardware options, and basic POS tools are a few features that you should look for during your search.

Accepts all brands.

Make sure that the credit card processor works with all major card brands, including Discover and American Express. This ensures that you don’t lose out on sales and frustrate customers.

PCI compliance.

The credit card processor should comply fully with the PCI Data Security Standard, which will help you maintain PCI compliance.

EMV compliance.

EMV-compliant card readers reduce your vulnerability to fraud and help shield your business from liability in the event of a security breach.

Hardware options.

Confirm that the credit card processor’s software works with the type of equipment that you will need to accept payments.

POS tools.

Most credit card processors include basic POS software. If you don’t plan to purchase a separate POS system, then you should look carefully at which features are included as part of the processor’s software.

What factors should you consider when choosing a credit card processor?

In addition to the criteria above, when choosing a credit card processor you should consider several other important factors, such as pricing, ease of use, third-party integrations, customer service and features, such as a mobile app.

Pricing.

Estimate how much your business generates in monthly revenue and use that figure to evaluate which pricing model makes the most financial sense. Whether you choose a processor that follows the interchange-plus pricing model or a flat-rate model will depend on your profit margins and sales volume.

Ease of use.

The best credit card processors sport sleek, modern user interfaces (UIs) that are easy to learn and navigate. If you accept payments in person, make sure that the POS hardware is user-friendly. The best equipment is plug-and-play and ready to accept credit cards immediately. On the e-commerce side, ensure that the processor’s software is compatible with your existing technology stack for easy integration.

Third-party integrations.

Some credit card processing software programs integrate with accounting, POS, human resources and other business productivity software. Make a list of apps that you use for your business and check for compatibility. A few processors also feature open application programming interfaces so that you can build custom solutions.

Customer service.

Credit card processors vary widely in terms of customer service. While some stand out on user review sites for providing top-notch technical support, others score poorly. The standouts in customer service often provide 24/7 phone support and a dedicated account manager. Other options include live chat and email support. If being able to reach the company at any time is important to you, make sure that the customer support options reflect that.

Additional features.

Many credit card processors specialize in servicing a particular type of business. Some focus on providing tools for retailers or restaurants while others are more geared toward e-commerce businesses. Business owners who like to work on the go should ensure that the processor provides a dedicated mobile app. When reading about a credit card processor’s features, think about what your business needs.

What are the top credit card processor vendors?

Clover

Clover provides a variety of pricing plans for different business types, particularly restaurants, retailers and appointment-based businesses. The company is best known for its range of POS hardware, including mobile readers, handheld terminals, and registers. Clover’s POS software integrates with more than 500 third-party apps.

Merchant One

Merchant One customizes plans for individual business needs and offers highly rated customer service. With a low monthly subscription fee of $6.95 and integration with more than 175 online shopping carts, it provides cost-effective solutions.

ProMerchant

ProMerchant offers fair deals for businesses that would otherwise struggle to secure credit card processing services. The company stands out with excellent customer support, including a dedicated account representative. ProMerchant’s willingness to work with any business type, including those with low credit scores, makes it an excellent choice for high-risk businesses.

Stax

Stax offers a subscription-based model without taking a percentage of revenue, which makes it particularly well-suited for high-volume businesses. With compatibility across various POS hardware options and a mobile app for on-the-go transactions, Stax also provides a great deal of flexibility.

Payment Depot

Payment Depot’s membership-based model is perfect for a business that wants to avoid high processing rates. With prices ranging from $59 to $99 a month, Payment Depot doesn’t take a cut of your business’s sales. The company collaborates with SwipeSimple for its software needs and is compatible with many third-party POS device makers.

Chase

As one of the nation’s largest banks, Chase leverages its massive treasure trove of credit card data to provide insights for business owners. With Chase, you can better target customers with data on demographics, purchase habits, and more. Chase also includes fast payouts, synchronization with financial services and Health Insurance Portability and Accountability Act-compliant payment solutions for healthcare businesses.

Helcim

Helcim’s all-inclusive platform includes an intuitive UI, diverse payment options and no contracts or monthly fees. It integrates with third-party devices, allowing flexibility as businesses expand.

PayPal

The PayPal brand name is widely recognized and trusted, offering plug-and-play solutions for online transactions. With various ways for customers to send money and integration with popular business apps, PayPal greatly simplifies online payment processes.
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Jason Fell

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January 17, 2024
U.S. Bank tech spend up 12% to $513M | Bank Automation News

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U.S. Bank made digital and operational investments during the fourth quarter as it focused on modernizing payments and technology. The $668 billion, Minneapolis, Minn. bank spent $513 million on technology and communication during Q4, up 12% year over year, according to its Q4 2023 earnings presentation. U.S. Bank is investing in its merchant processing […]

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Whitney McDonald

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January 17, 2024
Fraud cost $500B, illicit money topped $3T in 2023: Report

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As the scale of financial crimes grows around the world, banks and financial institutions see a tidal wave of fraud, money laundering and trafficking proceeds sloshing through the global economy, with better coordination needed within and between national governments to dam it, a new report by Nasdaq and the financial consulting firm Oliver Wyman found.

The numbers tell a stark story. Illicit money flows totalled $3.1 trillion globally in 2023, including $800 billion in drug trafficking proceeds, $350 billion from human trafficking, and $11 billion in terrorist financing. That total doesn’t include fraud, which cost almost half a trillion dollars last year, including close to $450 billion from payments, check and credit card fraud and more than $40 billion in scams targeting individuals and companies, the report found. But that’s just the fraud that authorities know about.

“You have to assume it’s more,” said Adena Friedman, CEO of Nasdaq, which bought Verafin, an anti-financial-crime cloud software company, in 2020. A surprising finding, she said, was “the sheer amount of money that is moved through the banking system for nefarious purposes.”

Check fraud and scams were among the most prevalent fraud issues for banks last year, said Mike Timoney, vice president of payments improvement at the Federal Reserve. People are writing fewer checks, but checks still are the least secure payment type, he said, noting that Fincen found that check fraud doubled between 2021 and 2022 and that 63% of participants said their organizations were dealing with check fraud in the Association for Financial Professionals’ Payments Fraud and Control Survey.

Banks are also scrambling to keep ahead of scamsters, he said, with the amount of money lost to scams growing even as the number of reported scams fell between 2021 and 2022, according to Federal Trade Commission data. One issue: “The industry lacks a consistent way to define and classify scams, making it difficult to identify current tactics for this type of fraud,” Timoney said. “The Federal Reserve is leading an industry work group that released a recommended definition of scams in fall 2023 and is focused on creating a scam classification structure to promote consistent scam reporting, trend measurement and analysis.”

Surveyed about what they considered the biggest threats, anti-financial-crime officials at 200 financial institutions said they were most worried about faster and instant payments (52%), money mules (47%), terrorist financing (33%) and drug trafficking (33%).

As more banks move to instant payments, including the Fed’s new FedNow system, guarding against payments fraud has become a major issue for banks. “I think [FedNow] is an important solution for the financial industry, but on the other hand, time is your friend a little bit when it comes to anti-fin crime, because by the delay in someone coming in or someone wanting to wire money or doing an ACH transaction and the time it takes to process that it enables the banks to do a lot of background checks and to do a lot of work ahead of the transaction actually occurring on issues of anti-fraud or crime,” Friedman said.

Without a payment delay, banks have to speed up their anti-fraud measures by checking customers’ bona fides rapidly, which requires faster processing, to avoid paying the wrong party.

Another emerging threat is human trafficking, which 19% of those surveyed named as a top concern for financial institutions. Popularly considered a problem mainly of forced prostitution and child exploitation, it goes far beyond that, said Ian Mitchell, founder and chair of nonprofit The Knoble, which coordinates with a network of 1000 banks and financial institutions to fight human trafficking.

“Since the pandemic, a new global phenomenon has emerged: human trafficking scam centers,” Mitchell said. “In these centers, criminal organizations force trafficked victims to commit financial scams against innocent people.”

Such operations — combining organized crime, trafficking and fraud — are just one example of how financial institutions need to work together, as well as with government agencies, to catch up to criminal enterprises, he said.

“There is much to do in the coming years to modernize our information sharing, enhance support for law enforcement with better data and intelligence, and leverage the best of financial services to protect victims and secure our financial system’s integrity,” Mitchell said.

The data-sharing aspect appeared on survey participants’ wishlist as well, with 68% saying they would like regulations to allow peer institutions to share more data and 49% asking for better collaboration and information-sharing with law enforcement and regulatory agencies.

Getting regulators, law enforcement and financial institutions to share information in a timely way is one of the main obstacles to fighting fraud and financial crime, said Daniel Tannebaum, a contributor to the report. When banks file suspicious activity reports to regulators, they often don’t receive feedback on whether the report led to catching a criminal — and if they do hear back from the agency, it’s often not until much later, he said.

“That type of feedback is critical to refine your financial intelligence unit so you identify what they really should be focused on,” said Tannebaum, a partner at Oliver Wyman and former Treasury and New York Federal Reserve Bank official. Without this feedback, banks can’t train their fraud-spotting systems to find problematic behavior patterns, or to screen out patterns that look dangerous but are actually harmless.

With regulators’ permission, banks can use these signals as part of AI training, which 58% of survey participants said they have plans to do, and Friedman said that’s an opportunity for financial institutions.

“I think that gen AI is going to help us get a lot smarter and a lot better at really kind of finding real criminals but also making sure we don’t have a lot of false positives,” she said.

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Chana Schoenberger

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January 16, 2024
Fiserv wants a special purpose bank charter. What does this mean?

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Fiserv has added more merchant services in recent years.

In a tightly competitive payments market in a cost-conscious economy, Fiserv is trying to expand the amount of processing work it can do for merchants.

The bank technology seller has applied for a merchant acquirer limited purpose bank charter in Georgia. That would allow Fiserv to control the entire payment process, including authorizing, settling and clearing debit and credit card transactions. Fiserv normally uses bank partners as part of payment processing.

In an email on Friday night, Fiserv’s public relations office said the company is “taking this step in response to recent market changes, as third-party financial institutions that have traditionally provided access to the card networks as sponsor banks increasingly focus on other areas of their business.” Fiserv’s public relations office added that the company has no intention to become a traditional financial institution or regional bank, saying Fiserv will continue to partner with financial institutions that want to remain active in the market as acquiring sponsors.

The decision could make a strong bank technology company even stronger.

“Fiserv dominates the non-bank acquiring space, and with the move to build out a special-purpose bank, they can orchestrate payments and drive down costs,” said Brian Riley, co-head of payments at Javelin Strategy & Research. Payments orchestration refers to processing and routing transactions based on the fastest, most efficient and cost effective option, and has become a major point of competition in the payment technology industry.

Fiserv faces numerous competitors, including traditional rivals such as FIS, global rivals seeking a foothold in the U.S. like Adyen, and payment technology companies such as Stripe, Square and PayPal. In a slower economy, there’s pressure to diversify while containing expenses.

The merchant acquiring market in the U.S. is top heavy. JPMorgan Chase is the largest merchant acquirer in the U.S. in terms of number of transactions, with about 36 billion in 2022, according to Statista data released at the end of 2023. Fiserv is the second largest at about 35 billion and FIS/Worldpay is third at about 31 billion. The next largest bank merchant acquirers are Wells Fargo and Bank of America, both with just less than 10 billion.

“With [Fiserv CEO Frank Bisignano’s] depth in payments, there’s a more considerable downfield advantage,” Riley said.

Bisignano, who earlier in his career was CEO of payments company First Data, became Fiserv’s CEO in 2020 following Fiserv’s acquisition of First Data in 2019. At First Data, Bisignano oversaw a multi-year technology transformation. He also held executive positions at Citigroup and JPMorgan Chase earlier in his career. At Fiserv, Bisignano has overseen expansions in pay by bank, the company’s Clover point of sale system and other initiatives.

Fiserv has recently expanded its merchant services beyond payment processing. In late 2023 it began selling embedded finance tools to independent software vendors that sell to merchants in e-commerce, health care, logistics and travel. That service uses tools from Finxact, a firm Fiserv acquired in 2022 that sells cloud technology and open development tools to speed financial technology upgrades. A bank charter, even limited, would provide Fiserv another incentive to keep merchants from using other vendors.

“One thing for sure is that there is more to the story than Fiserv wanting to reduce costs in the low-margin merchant acquiring business,” Riley said.

Fiserv, which traditionally specialized in selling core banking systems, got a major boost in payments when it acquired First Data in 2019, creating a company with more than 12,000 financial institutions and 6 million merchant locations. First Data had a merchant services joint venture with Bank of America, though that partnership was discontinued following Fiserv’s purchase of First Data.

The economics of payment processing have become more challenging, with slowing revenue growth from 8% in 2017 to 6%, according to Boston Consulting Group. Among Fiserv’s competitors, bank technology seller FIS is in the midst of partially separating from payment processor Worldpay. The original deal to create two public companies was changed — Worldpay was taken private with FIS retaining a stake. FIS positioned the change as a way to free funds for more acquisitions, while analysts said it was a sign of a challenging market for payment processing deals.

The factors that are challenging processing revenue include inflation, a slowing economy and the proliferation of other options, such as Stripe, Block, PayPal and smaller niche fintechs, according to BCG. An acquirer that is the bank and the processor owns the merchant relationship takes on more but also owns the origination channel and delivery of internal and third-party services, according to Eric Grover, a principal at Intrepid Ventures. “[That firm] controls the value chain and will capture the lion’s share of economics providing payment acceptance and bundled services,” Grover said. “There’s a cost of owning and running a bank and a regulatory burden, but it provides greater control.”

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