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CoverStory

security. In June, EWS announced it had partnered with
McKinsey & Co. explained in Fiserv, which offers a turnkey solution for financial insti-
a report that agentic shifts AI tutions wishing to offer Paze; it also can enable merchants
to accept Paze at their checkouts.
from being a reactive helper to Open banking rule gets yanked
a proactive agent for shopping, Another CFPB action scrapped this year was its open

payments and investing. banking rule. That rule was intended to give consumers
And that has been playing out as more control over their financial data, such as directing
the sharing of their account information with consumer-
consumers shop for the facing fintechs.
year-end holidays. While the consumer watchdog agency is said to be work-

ing on a new open banking rule, JPMorgan Chase took ad-
vantage of the pause in regulation to ink deals in Novem-
X wallets in real time using Visa Direct, with instant trans- ber with several large data aggregators that link banks
fers to bank accounts via debit cards. with fintech apps that provide budgeting, payments and
other financial services.
While Elon Musk, who heads up X, had planned for X
Money to be up and running by now, the game plan was The deals' terms require the aggregators, Plaid, Yodlee,
thrown into a state of flux largely due a complex web of Morningstar and Akoya, to pay for account data they pre-
necessary regulatory approvals (state money transmitter viously obtained for free, according to published reports.
licenses, for example).
Interchange remains hot topic
Also, X has been subject to scrutiny by the Federal Trade
Commission over allegations of misuse of user data. Ad- Interchange remains a bone of contention, with Visa and
ditionally, accoding to published reports, X experienced Mastercard on one side and merchants and Senator Rich-
significant turnover among staff tasked with building the ard Durbin, D-Ill., on the other.
X Money infrastructure.
In November, Visa and Mastercard released a proposed
Zelle: the good and the bad settlement, valued at about $38 billion, in the long-run-
ning legal battle with merchants over the cost of card ac-
As for P2P payments, the CFPB sued Early Warning Ser- ceptance. The proposal would scrap the honor-all-cards
vices, the bank-owned operator of the P2P network Zelle, rule, lower the average effective interchange rate by 10 ba-
in ecember 2024 for failing to adequately protect consum- sis points for five years and offer more flexibility around
ers from fraud. But that lawsuit was droppe in March, surcharging.
with the bureau citing shifting priorities.
But several leading merchant associations believe the set-
However, the New York Attorney General's office picked tlement doesn't go far enough. So, it remains to be seen
up the case, suing EWS for failing to protect consumers whether the judge overseeing the lawsuit will approve the
from being pilloried by massive frauds. The state claims proposed settlement.
an estimated $1 billion in fraud was lost by Zelle users
between 2017 and 2023, and it blames EWS, asserting it de- In the meantime, Sen. Durbin continued to push his Credit
veloped Zelle without critical safety features. EWS refutes Card Competition Act, which seeks to lower the cost of
the charges, characterizing the lawsuit as "a political stunt processing through competition. He wants card issuers to
to generate press, not progress." program credit cards to give merchants a choice between
two competing processing networks, only one of which
Congressional Democrats also have been on the case, grill- can be owned by Visa or Mastercard.
ing executives of EWS and its owner banks, pressing them
to adopt stronger anti-scam measures and to reimburse Instant payments gain momentum
consumers defrauded via the network.
Instant payments charted significant growth this year.
Meanwhile, a major outage on Zelle in May froze pay- The Clearing House reported that as of September its RTP
ments nationwide, disrupting transfers at major banks network had cleared $1.3 trillion in payments this year – a
due to a Fiserv system failure. The outage spotlighted the 428 percent increase over the entire year of 2024.
fragility of digital payment systems.
FedNow, the Federal Reserve's instant payment network
Against this backdrop, EWS rolled out a new digital wal- cleared 2.5 million payments in the third quarter valued at
let for ecommerce: Paze. The Paze wallet, offered through $307 billion, a 25 percent increase over the second quarter
financial institutions, leverages payment tokens for added of this year.

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