Both the Fed and CFPB came in hot this week with announcements that will have direct bearing on the payments and banking sector. On the payments side, the Wall Street Journal reported on Tuesday that the Fed will vote on a proposal to lower debit card swipe fees next week, acting on its unilateral authority to do so (though they do intend to accept comments on the proposal). The Fed is allowed to cap fees if it feels that the actual costs attributed to processing those transactions has declined (which they obviously feel it has). The Fed flex seems to be in reaction to what they perceive to be a burden on consumers who now use electronic forms of payment, both debit and credit, in much greater frequency as a result of the “I don’t want to touch your cash ethos” of the pandemic. Though no one will cry for the largest financial institutions taking a hit to swipe fee margins, what’s of particular concern is the implication for Durbin Amendment exempted banks (those with assets under $10B) who were not subject to the swipe fee caps before, and rely on that interchange as a primary revenue generator.
Also this week, the CFPB chimed-in with an open letter from Director Rohit Chopra announcing its proposal for the Personal Financial Rights Data Rule which will crack-open financial institutions’ highly guarded treasure troves of consumer financial (banking) information, from Tier 1 banks to credit unions, and make that information accessible to third-party fintech and service providers upon the consumer’s direction. At a high-level, the move is a 180 degree turn from the government’s historical position of holding FIs responsible for “securely holding and protecting” consumer PII and PANs on behalf of depositors. However, the CFPB has clearly weighed the costs and benefits of the policy and landed in favor of openness, fairness, and the theoretically greater competition that will accrue to the benefit of consumers, as evidenced by the perceived success of the EU’s implementation of PDS2.
Your government at work folks!
