Quick takes: Things that caught our eye this week

Today, we've highlighted the U.S. Treasury Department's urging for a federal framework for nonbank payment service providers to simplify simplify the existing regulatory patchwork, promote innovation and protect consumers; a new marketing resource specifically designed for ISOs, a significant cyberattack on global money transfer service MoneyGram; and reaction to UK's plan to grant banks powers to delay payments by up to 72 hours to investigate suspected fraud or scams.

Nonbank payment services under scrutiny

A federal regulatory framework for nonbank payment service providers is essential to reducing risks and fostering innovation, according to Nellie Liang, under secretary for domestic finance at the U.S. Treasury Department. Speaking at the Chicago Payments Symposium on Oct. 9, 2024, Liang emphasized that the current state-based regulatory approach is outdated and creates inconsistencies across states, limiting competition and innovation.

Liang outlined three foundational elements for a modern regulatory framework. First, nonbank payment service providers should adhere to financial resource requirements to protect against insolvency. This would ensure customer claims are backed by high-quality, liquid assets. Second, robust risk management standards are needed to address operational and third-party risks. Third, activity and affiliation restrictions would prevent e-money issuers from acting as banks without adhering to banking regulations, which would help maintain fair competition.

Liang argued that a federal framework could simplify the existing regulatory patchwork, promote innovation and protect consumers. She also highlighted the Treasury Department’s ongoing evaluation of new technologies, referencing its 2022 report, The Future of Money and Payments.

The report explores potential benefits of innovations, like central bank digital currencies, and advocates for a modernized regulatory system that supports innovation, improves cross-border payments, and bolsters U.S. global financial leadership. With these measures, Liang said, the Treasury seeks to create a more level playing field for payment service providers while safeguarding the integrity of the financial system.

A new, tailored marketing resource

Christopher Hernandez, CEO at Portfolio Buyer, revealed that he launched a new enterprise, MerchantConnect Marketing. He described the venture as being at the cutting edge of the merchant services industry marketing, dedicated to providing innovative and customized solutions that drive business growth and enhance customer interaction.

"We specialize in crafting targeted marketing strategies for independent sales organizations (ISOs), ensuring each campaign aligns perfectly with your business objectives," he wrote. The new company's approach, he noted, combines deep market insight with a commitment to excellence.

"By leveraging advanced digital tools and data analytics, we empower businesses to reach their target audiences effectively," he said. He mentioned that the company's wealth of expertise ensures that every aspect of each marketing campaign is executed with precision and care. He also said that the team at MerchantConnect believes in building enduring partnerships with clients.

"Our success is measured by your success, and we are committed to delivering results that surpass expectations," he said. "Whether you're expanding your merchant portfolio or seeking to enhance customer engagement, MerchantConnect Marketing is your trusted partner in navigating the complexities of the merchant services landscape."

Another attack, more sensitive data exposed

MoneyGram International confirmed a significant cyberattack that exposed sensitive customer data, including personal and financial information. The attack, which occurred between Sept. 20 and 22, 2024, led to a days-long outage that halted transactions until Sept. 25. The company initially described the issue as a network outage but later acknowledged it was a cybersecurity breach that affected critical systems.

In a statement on Oct. 9, MoneyGram revealed that the attacker infiltrated its network and accessed such sensitive customer data as names, bank account numbers, transaction details, contact information, and government-issued identification. The extent of the breach varied by individual, but it raised concerns about the security of MoneyGram's customer data.

MoneyGram, a large, global money transfer services, operates in over 200 countries. This breach, analysts noted, underscores the far-reaching impacts of cyberattacks on international businesses. The company has not disclosed how many customers were affected or provided details on how the attacker gained access to its systems. It remains unclear whether ransomware was involved.

The Dallas-based firm said it is working with law enforcement and external cybersecurity experts to investigate the breach and strengthen its systems. While normal operations have resumed, MoneyGram continues to address a backlog of customer transactions caused by the outage. The company’s ongoing investigation aims to uncover more details about the attack. For now, the full scope of the breach remains unknown.

Concerns about allowing 72-hour delays in payments

Following news that the UK Treasury will grant banks powers to delay payments by up to 72 hours to investigate suspected fraud or scams, Alex Reddish, head of market expansion & GTM strategy at Tribe Payments, said the plan is well intentioned, but it could lead to a host of unintended and unfortunate consequences. He believes consumers will lose out the most.

"On the surface, it seems sensible to give banks and PSPs more time to investigate suspected fraud," Reddish wrote. "But it’s clear that the tight investigation timeframe of five days under the APP reimbursement rules has now created a situation where consumers will face even more friction in their payments—at a time when the industry has made huge strides in removing friction without compromising payment security.

"Jamming payment flows while also encouraging instant payments is counterintuitive to the government’s aim of making payments more efficient. Not to mention how this will affect PSPs’ obligations under other regulations like Consumer Duty. Not only will these delays cause huge frustration and anxiety for customers, but it could also cause them to be subject to late payment fees and penalties, and potentially damage their credit records. For businesses, it could mean liquidity and cashflow problems while transactions are investigated."

Reddish also pointed out that today’s lightning-quick transaction monitoring tools and fraud management systems can spot and stop fraud in real-time without disrupting customer payment flows.

He further stated that the government has "ignored the fact that most of the fraud it’s trying to tackle originates from social media and tech entities that are dragging their heels and refusing to take accountability in giving APP fraudsters room to operate. It’s a fact that Meta platforms are the biggest source of scams worldwide. Financial institutions shouldn’t be the only ones reimbursing fraud victims."

His concerns go beyond the immediate impact on consumers and businesses because, he feels the 72-hour hold could stifle the broader fintech ecosystem. "Fintechs rely heavily on banks to drive innovation in payments, but with new players already under more pressure than ever, slowing down payment flows adds friction that could hinder growth across the sector."

He advised that the government and regulators "owe it to consumers to pause for breath and listen to all stakeholders’ views, and not just those who shout the loudest. Only then will we have fully formed regulations that balance consumer protection with ecosystem competition.”

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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