“Influenced by the power of automation and technology, an on-demand economy hits workers and employers with a sense of urgency that constitutes payment immediately after completion of a job. Make no mistake about it, instant on-demand pay isn’t just about contractors and freelancers in the gig economy. Traditional W-2 employees are slowly beginning to have access to this type of pay as well. Some businesses, such as McDonald’s and Outback Steakhouse, use tools to provide daily paychecks to their workforce. Another example is Gusto, a payroll and HR provider that launched its flexible pay feature this past year.”

“In the West, banking has been late to the smartphone age. This is partly because entrepreneurs have been put off by increasing regulations, and partly because banks have been preoccupied with repairing their balance sheets and cutting costs since the financial crisis. But mobile banking is now reaching critical mass. Nearly half of Americans bank on their phones. The U.S. tech giants might follow China’s example and integrate digital payments into their apps, while relegating incumbent banks to providing back-end financial services.”

“He zeroed in on the matter of fraud protections in an environment where value travels between accounts in a matter of seconds. Some networks, he said, “don’t have the same protections you have in a payments ecosystem.” Transactions are irrevocable, he said, raising the question, “if I now have a dispute with you or some element of chargeback with you, how is that going to work? With great difficulty would be the answer.””

“The rapid growth of fintech influence, increasingly sophisticated technology capabilities, growing client expectations, as well as new regulatory requirements, are fuelling the need for modernised payment systems and the development of cutting-edge digital solutions. Undoubtedly, the payments space is experiencing a period of rapid evolution, with technology presenting opportunities for the industry to transform how transactions are processed.”

“A recent Forbes article attempted to refute many of the conclusions of a prior Wall Street Journal article that had illustrated how the card schemes (Visa Inc. and Mastercard Inc.) have dramatically increased their fees in recent years. In response, the Forbes article challenged the Journal article by completely changing the subject to interchange fees instead of scheme fees. That response relied upon faulty logic and misleading statements to conclude that interchange fees have not increased. In fact, we estimate that interchange fees, as with scheme fees, have increased dramatically. While our analysis has focused on the period following passage of the Durbin Amendment, we note that some of the most egregious increases occurred just prior to Durbin by virtue of Visa’s introduction of its “Signature” products as well as issuers’ efforts to convert small businesses from using “consumer” cards to “business” cards.”

“FIS’ and Fiserv’s acquisitions of Worldpay and First Data for $43 billion and $39 billion, including assumed debt, create two fintech and payments giants. Cheerleaders sing the deals’ hosannas, declaring they will transform the bank and payments processing landscape. But simpler, more focused fintechs and payments enterprises such as Adyen, Square and PayPal in 2018 increased net revenue year over year by 60 percent, 49 percent and 18.4 percent, respectively. Neither FIS nor Fiserv on its current path is going to generate double-digit organic growth.”

“But the problem is that while it may be safer and more convenient to pay without cash, banning the use of cash could be discriminating against low-income individuals without credit or bank accounts because of the fees and minimum balance requirements. In fact, local and state governments are rather up in arms about the whole thing. Earlier this month, the Philadelphia City Council passed a bill making it the first major city to ban cashless payments. New Jersey. Now New York City, Washington, San Francisco and Chicago are now all weighing similar bills.”

“Apple has once again shaken up the technology space after unveiling its highly anticipated venture into consumer credit, called Apple Card, under a partnership with Goldman Sachs and Mastercard. The service provides users a sleek digital credit card that offers cash back rewards, no major fees and a level of transparency and control over how they repay purchases and manage their overall finances that few products can match.”

“Although paper check payments are declining, they still account for nearly half of B2B transaction volume overall. Small- and medium-sized businesses (SMBs) are the heaviest users despite inefficiencies associated with handling paper, including tendencies to misplace checks. The independent store owner, for example, often writes a check collected by a delivery person to take to the supplier where it makes its way to the back office – encountering multiple points of manual handling and potential misplacement along its route.”

“While the Fed’s entry has been called for by some smaller institutions that are concerned that the fees for real-time processing may be too high, RTP charges all institutions the same price. There is no reason to think the Fed will necessarily match this price, given that it lacks the infrastructure possessed by The Clearinghouse and is not allowed to cross subsidize anything it offers to members.”