New layers of regulation should promote prepaid growth
Innovation thrives in a regulatory landscape that gives organizations the confidence to try something new and bold.
Yet, as legislation adding new layers of regulation to the prepaid and fintech market continues to be introduced—especially at the state level—lawmakers must identify pro-growth policies that continue to power our economy.
Whether you realize it or not, prepaid has been driving innovation in the payments industry for years and the prepaid community is proud to play a role in the development of new and exciting payments. From developing technology later incorporated into mobile wallets, ensuring our products can be used on wearables, or partnering with large fintech companies and retailers to deploy new card products, prepaid has been behind it all.
We don’t plan to stop there, especially as the payments industry continues to grow into new areas. We’re thrilled to see major companies like Starbucks, Apple and PayPal embrace prepaid technology and join our community.
Technological advancements pioneered by the prepaid community—think real-time account updates and fraud notifications—help improve the safety and convenience essential to consumers and businesses alike. As such, we encourage policymakers to listen to the concerns of the prepaid community and consumers to promulgate regulations that protect consumers and foster an innovative marketplace.
On its face, attempts to legislate or regulate innovative payments treat consumers, who have affirmatively selected to use prepaid accounts or some other emerging access device to access their money, much differently than consumers who have decided to open a traditional bank account with an associated debit card.
This is particularly relevant considering that the limitations on such features hinges on the access device selected by the consumer. In some instances, many of the solutions being proposed in many jurisdictions will make it impracticable for prepaid account providers to continue offering account features that take advantage of the full range of a prepaid account's potential benefits for consumers.
While we acknowledge the admirable goal of protecting consumers from potentially harmful products, we believe this goal can be addressed without the restrictive guidelines that ultimately pick winners and losers in the marketplace. The key to resolving this issue is education.
For instance, after years of education from the prepaid community and collaboration with the CFPB, in January the bureau announced in that the prepaid accounts regulations wouldn’t go into effect until April 2019, while offering some needed clarifications on the rule’s requirements. This additional year for compliance is a positive step forward toward customers having uninterrupted access to their products while allowing the prepaid and innovative payments community to get back to the important work of moving the financial sector forward through innovation.
All of us must focus on giving consumers the ability to choose how and when to use products, as each consistent with the diversity of needs present in the payments marketplace. For instance, millennials—who account for 40 percent of reloadable prepaid card spending—rely on these products to help manage budgets and avoid debt, as well as take advantage of the other benefits that come with prepaid. Yet, there are others who rely on prepaid accounts to receive their government benefits or to give their children money in an easily controlled manner.
There are so many products on the market, ranging from business-minded payroll and small- business cards to more personal accounts that can be leveraged for traveling or gift giving. With prepaid, fintech and a constantly expanding list of new financial tool innovations, the possibilities are endless. Yet, when regulatory uncertainty looms over companies’ heads, game-changing ideas see reduced resources, decreasing output or ceasing altogether.
Prepaid and fintech companies stand ready to collaborate with policymakers to help them better understand the innovative payments community when they are making decisions that impact the financial well-being of their constituents.