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CoverStory

The CFPB also has been looking into Consumers get a secure payment method, and merchants can leverage open
the enormous growth some fintechs banking with advanced decisioning engines to initiate payments at optimal
have charted with buy now, pay times. In October, JPMorgan Chase became the first big bank to offer pay-by-
later products. In November, alone, bank using open banking technologies provided by Mastercard. Chase said it
for example, online retailers rang will use traditional ACH rails to support payments directly from a consumer's
up over $7 billion in BNPL transac- bank account. Chase said in a press release that it has a "robust pipeline" of
tions, according to Adobe Analytics. biller clients ready for pay-by-bank.
But storm clouds are on the horizon.
In a report published in March, the Mastercard is heavily invested in open banking, which allows for the shar-
CFPB noted that a majority of BNPL ing of a consumer's financial information between their banks and authorized
customers tend to be financially dis- third parties by way of application programming interfaces (APIs). A key ben-
tressed; about one in four have no efit for billers, especially those collecting recurring payments, is that open
credit card liquidity. banking eliminates the need to store and regularly update sensitive customer
financial information. Looking ahead, merchants need to be ready for the PCI
CFPB officials began work this year Data Security Standard v.4.0, which takes effect in March 2024. The updated
on a set of guidelines for overseeing standard is expected to provide qualifying organizations with more latitude in
BNPL, including supervisory exams interpreting the guidelines.
and reporting requirements in line
with those that apply to credit card "From time-based requirements to vulnerability management, the standard
issuers. calls upon organizations to look at how they operate, what is required to oper-
ate, and how this impacts the security of cardholder data," said Adam "Sully"
Security is serious business Perella, technical director at Schellman Compliance.

Acquirers and their partners, and the
merchants they serve, have upped Patti Murphy, self-described payments maven of the fourth estate, is senior editor at the Green
their games over the past 40 years. Sheet. She also co-hosts the Merchant Sales Podcast, and is president of ProScribes Ink (www.
So, too, have fraudsters. "Balancing proscribes.net)
security with a modern customer
experience is a key challenge today,
and outdated methods of identity
verification that rely on credit files
or introduce too much friction will
put businesses at a disadvantage,"
said Christina Luttrell, CEO for CBG
Americas at IDology, an identity veri-
fication provider.

As the move to faster payments (like
FedNow and same-day ACH) accel-
erates, experts warn that the risks of
fraud and errors will also grow. A
November report by AutoRek, a fi-
nancial services software provider,
found most U.S. firms lack the infra-
structure needed to support faster
payments. Another report, published
by the UK's Payments System Regu-
lator, revealed that fraudsters are
already working at exploiting faster
payment methods to access transac-
tion and accountholder data.
This may be one reason for the sud-
den interest in pay-by-bank partner-
ships that leverage open banking
technologies. Open banking is said to
benefit both merchants and consum-
ers.

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