Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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January 13, 2020
My Madeleine Moment: A 1965 Penny
It's not often that reading a book related to my professional activities reminds me of my grandmother. Born in 1900, she regularly stuffed me with tapioca pudding. Decades before the Instapot, she mastered the pressure cooker. Always ready with a hug, she turned up on page 46 of Bill Maurer's How Would You Like to Pay? How Technology Is Changing the Future of Money.
My grandmother always carried a penny, loose, in her "pocketbook" for good luck. If she gave me a handbag or coin purse, there would be a penny inside. It was essential. I couldn't walk out the door without a penny for luck.
My Proustian moment came when I read Maurer's comment: "People working on new technologies of money tend to assume that money is just money. But money is so much more, besides." And up popped the penny, a memory buried for decades.
You may have childhood memories around the idea of money-as-more-than-money. An uncle who surreptitiously handed over a crisp bill, perhaps. Or adult memories—for example, the dry cleaner who refused to exchange two of my singles for one of his lucky $2 bills.
Maurer, an anthropologist at the University of California, Irvine, posits that such extra-monetary characteristics of money are important for financial product design going forward. And, indeed, we've seen examples of form factors that add value. Doug King has reported that some consumers are enamored of metal credit cards. "They love how metal cards feel and they love the sound that they make when they drop them on a counter or table." My neighbor tells me that she feels cool tapping her watch to pay for groceries. Many consumers work hard to keep a pristine titanium card clean; some store it in a special pouch.
There's something more to this than a medium of exchange, a unit of account, a store of value, as Maurer notes when he describes the use of money in rituals around the world. He writes that people do "all sorts of things with money besides earn it, pay with it, and save it." Take, for example, my origami dog, pictured here.
How are financial institutions and fintechs incorporating ancient totems into product design so that the safest way to transact would also have this sort of intrinsic value-add? Let me know your thoughts.
December 9, 2019
Payments in Review: A Webinar
Whether you are out dipping your payment card at a store, waiting in line behind a check writer, trying to look like you're working while you shop online for last-minute gifts using your digital wallet, or just always looking for more information about payments, grab your headphones for the last Talk About Payments webinar of 2019. On December 19, the Retail Payments Risk Forum team continues its tradition of discussing what we consider to be the significant payments events and issues of the year. We invite financial institutions, retailers, payments processors, law enforcement officials, academics, and other payments system stakeholders to participate.
The webinar 2019: Payments in Review features a live roundtable discussion with payments risk experts Doug King, Dave Lott, and Jessica Washington. You will be able to see how your reflections on 2019 payment events compare to the Risk Forum's perspectives and reflections on the year. To liven up the party, polling questions and real-time questions and comments will let you engage with the speakers.
Last year ended with increasing momentum in technology research and development—distributed ledger technology, contactless, machine learning—which continued into 2019, mixed with the some of the largest fintech mergers and acquisitions the industry has seen. Faster payments started taking new forms with added interest from industry stakeholders. The fight against payments fraud also changed shape during 2019, with some new collaborations and methods worth mentioning. Fintech is surely to be discussed along with other topics such as the proliferation of digital payment methods versus the state of cash.
Find out what you might need to consider as you promote safer payments innovation in the coming year.
The webinar will happen on Thursday, December 19, from 1 to 2 p.m. (ET). Participation is free, but you must register in advance. Once you register, you will receive a confirmation email with the log-in and toll-free call-in information. A recording of the webinar will be available to all registered participants in various formats within a couple of weeks after the event.
We look forward to you joining us on December 19 and sharing your perspectives on the payment events that took place in 2019.
September 23, 2019
Designing Disclosures to Be Read
Have you ever wondered if consumers actually look at disclosures for payment services? And if they do look at them, how much time do you think they spend reading them? If the average adult reads around 250 words per minute and a disclosure page contains 1,000 words—likely a low estimate—then a consumer would spend four minutes on the page before clicking accept or reject. I am confident that a more realistic estimate of time consumers spend on these pages falls far short of the time required to read the legally required consumer protection information. How many of us just click on the "I Accept" button without reading the disclosure? Maybe it's time to come up with a better way to disclose.
I believe that disclosures are one of the more dreaded elements in designing, launching, and managing financial services. If you haven't experienced the dread first hand, you can find evidence of it in the countless comment letters submitted by payments stakeholders and posted to the Federal Register when a proposed rule could affect disclosure terms. The work and expense of delivering disclosures at precisely the time required by law are completely wasted when consumers fail to read them.
The goal of disclosures is to educate consumers on a product's terms and conditions, to define their responsibilities, and to ultimately protect them from financial harm or surprises. With this information, consumers can make informed decisions. We should hope consumers comprehend and retain the critical information provided.
Opportunities exist to present important consumer protection information in ways that are far more easily digestible than a thousand-word disclosure in a four-point font. For instance, a gamification model could ask the consumer direct questions related to fees in pop-up windows with animated visual representations of the scenarios. You can brainstorm to come up with messages, jotting down quick ideas—for example, "You chose instant transfer, the fee is $1, Accept or Decline." Or, "Help us monitor your transactions daily, instant transfers will be $0, Accept or Decline." A large font and short words can quickly articulate the key points and big risks. Moreover, building the disclosure logic into the technology better protects the consumer.
Here's some good news—you now have the support of the Consumer Financial Protection Bureau (CFPB) to test your innovative solutions in making disclosures likelier to achieve their aim. The CFPB's Office of Innovation recently issued new policies to encourage innovation. For example, the office instituted a trial disclosure program and has committed to granting or denying applications for these trials within 60 days of submission. Accepted applicants will have up to two years to test their disclosures. They will also have access to state and global regulators through the CFPB's affiliation with the Federal Financial Institutions Examination Council, the Global Financial Innovation Network, and the newly formed American Consumer Financial Innovation Network.
Applicants and disclosures need not be company- or product-specific, although that is an option. Service providers, trade associations, consumer groups, or other third parties may also use the trial application program. Group applications could help spread trial disclosure development costs such that smaller entities would be able to afford to participate in the program. Such intention has been evidenced in the CFPB's Office of Innovation's first "No-Action Letter," issued to more than 1,600 HUD housing counseling agencies, stating that it will not take enforcement action with agencies that enter into "certain fee-for-service arrangements with lenders for pre-purchase housing counseling services."
Have you considered redesigning a payment product or service disclosure that consumers will be likelier to read? Apply to test it , and good luck!
August 12, 2019
At the Intersection of FinTech and Financial Inclusion
Technological innovation is booming, and many financial institutions and financial service providers, including mobile phone providers, are increasingly adopting financial technology, or fintech, to offer easier and faster payments to consumers. In other words, the consumers who have traditional banking services such as checking and savings accounts naturally have access to solutions such as online or mobile bill pay, account and P2P money transfers, and customized saving options. But what about the people who don't have a bank account?
According to the Federal Reserve's Report on the Economic Well-Being of U.S. Households in 2018, approximately 6 percent of adults do not have a bank account, and approximately 22 percent are either unbanked or underbanked (having a bank account but relying on alternative financial services). How does the payments industry make sure that, in the words of the World Bank, all "individuals and businesses have access to useful and affordable financial products and services that meet their needs"? How can the industry help boost financial inclusion, which is "a key enabler to reducing poverty and boosting prosperity" (also in the words of the World Bank)?
Join us for the Atlanta Fed's latest episode in our Talk About Payments webinar series on Thursday, August 22, from 1 to 2 p.m. (ET). A panel of payments experts will focus on how fintech aims to improve financial inclusion by giving people who are un- or underbanked access to the payments system. Panel members will also discuss current research on financial inclusion and programs intended to support economic mobility.
Panel members are:
- Dr. Sophia Anong, associate professor, financial planning, housing and consumer economics, University of Georgia
- Nancy Donahue, Federal Reserve Bank of Atlanta
- Catherine Thaliath, Federal Reserve Bank of Atlanta
Participation is free, but you must register in advance. After you've registered, you'll receive a confirmation email with the login and toll-free call-in information. We hope you and your colleagues will join us and be part of the discussion as we delve into the ways financial technology is helping to meet the needs of the underserved.
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