September 10, 2019
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Why debit card use is on the rise-but so is fraud

Debit cards often lack the rewards and spending power of credit cards, and thus do not figure prominently in TV ads or direct mail flyers. Yet despite these limitations debit cards are beloved by millennials and anyone else who wants to avoid credit card debit. They are the power behind Venmo transactions and are now the preferred method for paying at the gas pump.

When debit cards rose to popularity in the 1990s and 2000s, banks were able to profitably benefit from rising interchange rates, and at one point commonly offered rewards on them - especially when consumers opted to sign for their transactions instead of using a PIN.

Merchants balked, and the Durbin amendment was born, slashing interchange for covered banks with assets of $10 billion or more. The result was that debit marketing programs at big banks were wiped out, and now M&A activity for exempted banks (assets under $10 billion) is given pause should a bank exceed the asset threshold and become covered under the Federal Reserve's Regulation II (Durbin amendment). Read more at PAYMENTS SOURCE


Where are the jobs? These sectors saw the best, and worst, growth in August

Job growth faltered in August, with the U.S. economy adding a tepid 130,000 new positions, well below analysts' expectations.

The number, which would have been even lower if not for the addition of 25,000 temporary census workers, added to fears the record-long economic expansion is coming to an end, a direct result of slowing global growth and trade war uncertainties.

"This is a mostly negative report with only some minor positive offsets," said Luke Tilley, chief economist at Wilmington Trust and a former Philadelphia Federal Reserve official.

Still, unemployment continues to hover near a 50-year low at 3.7 percent and some industries reported solid gains in employment.
Read more at FOX BUSINESS


U.S. banking sector reports $62.6 bln in profits for Q2 of 2019

WASHINGTON, Sept 5 (Reuters) - The U.S. banking sector reported $62.6 billion in profits in the second quarter of 2019, an increase in profit levels from the prior year, according to data from the Federal Deposit Insurance Corporation (FDIC).

U.S. bank profits increased by $2.5 billion, a 4.1% jump compared with the second quarter of 2018. The FDIC said the profits were driven by higher net interest income.

The FDIC also reported that the number of "problem banks" had fallen from 59 to 56 in the second quarter, marking the lowest level of struggling institutions since the first quarter of 2007. (Reporting by Katanga Johnson Editing by Chizu Nomiyama and Jonathan Oatis)
Read more at REUTERS

Dreher Tomkies LLP

A Closer Look at the US Alternative Finance Market

Last month, the Cambridge Centre for Alternative Finance (CCAF) published their annual report on alternative finance covering the Americas. "Reaching New Heights" covered online alternative finance data in North, South, and Central America as well as the Caribbean. CI wrote about the report when it first came out but we wanted to take a closer look at the data regarding the US as provided by CCAF

First of all, during 2017 the Americas generated $44.3 billion in total alternative finance during the year. An increase of 26% versus 2016. The bulk of this amount came from the US at $42.81 billion or 97%.

CCAF states that the US is one of the most advanced markets for alternative finance in the world.

"In 2017 the total volume of the market rose 24% compared to 2016, reaching $42.8 billion. Overall, from 2013-2017, the market grew at an average of 88.5% each year. Over these five years, the USA Market accounted for a total of $121.7 billion."

While the US market may be very advanced the number of platforms actually contracted during 2017. Read more at CROWDFUND INSIDER

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Banking reformers should first do no harm

The burden of student loans and consumer debt is again in the spotlight, as Presidential candidates promise relief through loan cancellations, interest rate caps, and broad reforms to our banking system.

The President and Congress elected in 2020 must address consumer debt burdens and the cost of credit. Fair access to capital helps Americans of all backgrounds create financial stability so they can realize a true quality of life.

Congress may consider sweeping changes to our financial system as early as this fall with debt forgiveness leading to increased family incomes and "rate-cap" proposals that impact access to capital.

For many communities, accessing banking and credit is already an uphill battle. This includes rural and minority communities, those living paycheck to paycheck, and young entrepreneurs. And let's not forget Native American nations, with some of the highest poverty levels, unemployment, and less access to secondary education than other populations.

As an economic development researcher and advocate for rural, tribal, and minority-owned businesses, I'm concerned that well-intentioned policies produced by political campaigns - not designed through careful market research - may prove disastrous for our communities.
Read more at THE OLYMPIAN


Eleventh Circuit Finds Forum Selection Clause and Class Action Waiver in Payday Loan Agreements Unenforceable as against Georgia Public Policy. by Charles Davis, III - Burr & Forman

In Davis v. Oasis Legal Fin. Operating Co., LLC, 18-10526, 2019 WL 4051592 (11th Cir. Aug. 28, 2019), the U.S. Court of Appeals for the Eleventh Circuit ("Eleventh Circuit") affirmed a decision in the U.S. District Court for the Southern District of Georgia ("District Court") that denied the defendant payday loan lenders' motions to dismiss and motion to strike class allegations. The plaintiffs, a class of borrowers, sued the defendant lenders, three entities operating as "Oasis Legal Finance," in Georgia for violating the state's usury laws. The Eleventh Circuit found that Georgia's Payday Lending Act and Industrial Loan Act "articulate a clear public policy against enforcing forum selection clauses in payday loan agreements and in favor of preserving class actions as a remedy for those aggrieved by predatory lenders."

In this case, the plaintiff borrowers entered into identical payday loan agreements with the defendant lenders for amounts generally less than $3,000 that were to be repaid from any recoveries from the plaintiffs' borrowers' separate personal injury trials.
Read more at JD SUPRA

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Federal Reserve paper looks at the trend, impact of cashless businesses

The Federal Reserve's Cash Product Office examines the impact of cashless businesses on retailers and consumers in a new white paper.

The paper, "Cash Me If You Can: The Impacts of Cashless Businesses on Retailers, Consumers, and Cash Use," looks at why some businesses consider going cashless and how this decision impacts consumer choice.

"This paper highlights one of the areas within our dynamic and ever-changing economy that could impact both the overall use of cash as well as the choices available to consumers when paying for goods and services," Alex Bau, director of Data and Policy Analysis in the Federal Reserve's national Cash Product Office, said. "As retailers seek to manage and control the costs associated with accepting a range of customer payment options, we encourage a discussion about the benefits and risks of cashless businesses so that both consumers and retailers can make thoughtful decisions about what they do at the register."
Read more at Financial Regulation News

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Japan's Beleaguered Banks Tap Robotics Firm to Automate Jobs

As Japanese banks cut thousands of positions to streamline their operations and cope with negative interest rates, some are turning to a U.S. startup for help.

UiPath is implementing its automation technology at the nation's biggest banks, and a growing number of regional lenders are tapping the firm, Japan head Koichi Hasegawa said in an interview.

"We think the financial industry has the biggest need for robotic process automation," said Hasegawa, a former chief operating officer of Barclays Plc's Japan unit. Banks "need to free employees from manual labor that are taxing in work hours and mental burden."

Known only to the tech-savvy a few years ago, robotic process automation is gaining traction at companies to perform repetitive and routine tasks. For banks like Sumitomo Mitsui Financial Group Inc., it's a useful tool as they seek to reduce headcount through attrition and reassign staff to more productive roles.
Read more at BLOOMBERG LP


Fintech is Driving Financial Inclusion

While much of the discourse revolving around innovation in financial services address specific sectors of the industry, such as lending, payments, or online capital formation, the reality is that the biggest beneficiaries of Fintech may be the underbanked: the millions of people who have never had access to sophisticated financial services.

Regardless of where you are standing today, there are segments within your community that have little or no access to financial services such as a basic savings account. The disparity becomes even more obvious when you compare high-income demographics against individuals with lesser means.

Geography obviously plays a role as rich countries, such as the US or European nations, have far higher percentages of individuals having access to basic financial services. But the advent of Fintech, and perhaps more importantly, the ubiquity of smartphones and internet access is fueling a significant change.

During the Cambridge Centre for Alternative Finance's annual conference, which took place in the UK this past summer, Alfonso Garcia Mora, Global Director Finance, Competitiveness and Innovation GP The World Bank Group, tackled this very topic: Fintech is driving financial inclusion.


Will Debt Consolidation Help Your Finances or Hurt Them?

Consolidating your debt could be a good or bad thing for your finances -- but it depends on your situation. Find out here if debt consolidation would be a financial life jacket or a financial disaster.

Debt consolidation is a simple process in which you qualify for a new loan and use the funds provided by your new lender to repay one or more other debts. You can consolidate all different kinds of debt. That's because your new loan could be used to pay off credit cards , student loans, medical debt, payday loans, or other personal loans.

In some cases, debt consolidation can be a great way to pay down debt faster and give you more wiggle room in your budget. But in other cases, it can leave you much more deeply in debt and can make debt payoff cost more. Whether debt consolidation will help or hurt you depends on your specific financial situation and your intentions.

To figure out how consolidation is likely to affect you, ask yourself these questions before you get a consolidation loan. Read more at NASDAQ


Credit union regulator to clarify bank acquisition rules

Dive Brief:
  • National Credit Union Administration (NCUA) Chairman Rodney Hood said the regulator will propose a rule clarifying credit unions' responsibilities when acquiring banks.
  • The not-for-profit financial institutions have acquired 21 U.S. banks since 2018, compared with 12 acquisitions in the prior five years, according to data from S&P Global Market Intelligence.
  • A leading trade group's report slams the practice, saying many tax-exempt credit unions are diverging from their mission to serve low-income households.
Dive Insight:
Credit unions should "make sure that they are acquiring a bank that comports with their existing field of membership and the lines of business they are operating in," Hood told The Wall Street Journal this week. Read more at BANKING DIVE


Google faces a new antitrust probe by 50 attorneys general

Texas will lead a joint state investigation into Google over antitrust concerns, state Attorney General Ken Paxton announced Monday.
The news follows the announcement of a joint state Facebook probe led by the attorney general of New York.
Google is also reportedly facing an antitrust probe from the U.S. Department of Justice.

Fifty attorneys general are joining an investigation into Google over possible antitrust violations, Texas Attorney General Ken Paxton, the initiative's leader, announced Monday.

The news confirms reports last week about the bipartisan investigation into Google's practices. The bipartisan probe includes attorneys general from 48 states, the District of Columbia and Puerto Rico. California and Alabama are not involved in the probe, Paxton said at a press conference.

At the press conference Monday announcing the probe, attorneys general emphasized Google's dominance in the ad market and use of consumer data.
Read more at CNBC

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