TUESDAY3pt AUGUST stroke, 100% 10 size, 2021 for VOL.top of 186newspaper No. 152 = 8.9931 inches AMERICANBANKER.COM Follow us on Twitter @AmerBanker PNC rebrands wealth 5 businesses as lenders vie for rich clients Welcome relief Personal-wealth businesses in the asset- Parents expect the expanded child credit to have a big management arm will be consolidated 2.5pt stroke = 6.75 inches under the newly christened PNC Private impact on their household finances, according to a Bank. Page 6 survey conducted before the payments began in July JPMorgan brings back See story on page 2 6 its mask mandate for vaccinated employees Very large impact The largest U.S. bank, which often sets 2pt stroke = 5.75 inches 27% policies ultimately adopted by the broader Large impact financial industry, announced the change in 28% a memo to staff Friday.Page 7 Moderate impact 22% Small impact Small bank seeds green lending with assist from fintech 1.5pt stroke = 4.666711% inches 7 No impact Ando, a challenger bank focused on 4% sustainability, is helping Virginia Don't think will be eligible Community Capital Bank expand its 5-year- 7% old clean energy lending program by finding 1pt stroke = 3 inches a bigger pool of depositors who are eager to 0% 5% 10% 15%20% 25%30% fund solar loans. Page 7

Source: J.D. Power Financial Health and Advice Program Brex withdraws applications 8 for industrial bank The San Francisco company says it will “modify and strengthen” its filings with the dailybriefing Complaints about crypto Federal Deposit Insurance Corp. and Utah 3 are soaring. Is a CFPB officials and “resubmit at a later date.” It’s the crackdown imminent? latest fintech to encounter such a setback, What the child tax credit — a As people more heavily use exchanges and though some later secured approval. Page 8 1 windfall for families — means other providers of digital-asset-related for banks services, they’re registering more beefs with Plaid settles class-action In the short term, the Biden administration the Consumer Financial Protection Bureau, 9 lawsuit for $58 million is asking the industry to help previously too. Experts say it’s only a matter of time The San Francisco data aggregator has unbanked households access their funds. before the agency invokes its broad authority committed to minimizing how much data it Longer term, some banks see a real to police the sector. Page 3 extracts from bank accounts. Page 9 opportunity in advising their customers on what to do with the large cash influx.  learns from its For card issuers, (See chart above.) Page 2 4 mistakes in payments 10 Fed’s Durbin proposal If the new Facebook Pay feels sows confusion Fed sets big-bank underwhelming compared to the social The Federal Reserve’s decision to reexamine 2 capital requirements network’s past efforts, that’s by design. It’s the Durbin amendment’s Regulation II following stress tests now taking a slower approach that could raises a host of concerns for banks and This year’s stress tests examined 23 banks help overcome the privacy concerns that credit unions over the processing of including JPMorgan Chase and Goldman plagued earlier projects. Page 5 purchases made online, Keith Ash and Sachs, with the remainder of the firms on Myron Schwarcz of Strategic Resource an “every other year” test cycle. The capital Management write. Page 9 requirements for those remaining firms are unchanged from last year. Page 3 TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 2

other families. institutions have an important operational CONSUMER BANKING Last month, Democratic Sen. Ron Wyden role with respect to the child tax credit, of Oregon demanded that the IRS fix stating that more than 85% of the first round technological issues with an online portal of payments were made by direct deposits. What the child where families that did not file tax returns last “In addition to increasing awareness year can go to sign up for the payments. Many and facilitating direct deposits, financial tax credit — of those families have low incomes. institutions can promote financial inclusion On July 30, three bank CEOs discussed through participation in programs like Bank the child tax credit during a meeting with On,” the statement read. “The Treasury a windfall Deputy Treasury Secretary Wally Ademeyo. Department will continue to engage A Treasury Department press release did not stakeholders in the financial community to for families name the chief executives but did identify ensure that all eligible Americans can receive them as members of the board of directors of these payments.” the Bank Policy Institute, an industry group Meanwhile, some banks have started — means for that represents big banks. reaching out to existing customers who are During the meeting, the CEOs spoke about eligible for the expanded tax credit about banks synergy between the child tax credit and a smart ways to use their funds. Such efforts private-sector-led initiative, known as Bank could generate more business for banks, as By Kevin Wack On, in which banks offer low-fee accounts in parents elect to stash some of the money in August 08, 2021 an effort to increase access to the mainstream savings accounts or college savings plans. The expanded child tax credit, signed financial system, according to a source The government payments figure to make into law by President Biden in March, is an familiar with the discussion. a particularly big impact on the household unexpected windfall to many families. For Safe and affordable bank accounts are balance sheets of families with relatively low banks, it represents both a short-run test and critical to receiving and using the child tax incomes. a longer-term opportunity. credit funds faster and without fees, Jonathan A single parent who earns $65,000 per The test is that many unbanked households Mintz, president and CEO of the Cities year and has two young kids could receive are having trouble accessing their funds in a for Financial Empowerment Fund, which an additional $15,000 between July 2021 timely manner, and the Biden administration establishes standards for Bank On accounts, and March 2022 as a result of various child- is asking banks to be part of the solution. said in a July statement. related provisions in the law that Biden On the flip side, parents who do have bank It’s unclear what exactly was said at the signed last spring, according to calculations accounts are likely to want advice on what Treasury meeting last month, but banks by Commonwealth, a nonprofit organization to do with the sudden influx of cash, offering have previously faced pressure to market that focuses on financial security. banks a unique customer engagement Bank On accounts more aggressively, which “We talk about it internally as a once-in- opportunity. would make more consumers aware of a-generation opportunity,” said Arijit Roy, an “I think that there’s a substantial their availability. In addition, not all banks executive vice president at Truist Financial. opportunity for banks and for others to currently offer the low-fee accounts. After the tax credits were enacted, Truist communicate with consumers about this In a written statement to American Banker, quickly assembled what executives called a basically free money in their accounts,” a Treasury spokesperson said that financial SWAT team to sort through the consequences. said Peter Tufano, a finance professor at the University of Oxford’s Said Business School who has been surveying U.S. families about Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 the child tax credit. Phone 212-803-8200 AmericanBanker.com Under the new law, married couples with 3pt stroke, 100% size for top of newspaper = 8.9931 inches income under $150,000 receive a tax credit of Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440

$3,600 for each child under age six and $3,000 2.5pt stroke = 6.75 inches per child ages six to 17. The benefit, which Managing Editor Dean Anason 770.621.9935 Reporters/Producers gradually phases out for higher-income 2pt stroke = 5.75 inches families, is larger than in previous years. But Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 arguably as important, much of the money Miriam Cross 571.403.3834 1.5ptWashington stroke = 4.6667 inches Bureau Chief Joe Adler 571.403.3832 is arriving in monthly cash payments over Jim Dobbs 605.310.7780 the second half of 2021, rather than only as a 1ptExecutive stroke = 3 inches Editor, Technology lump-sum credit at tax time. Penny Crosman 212.803.8673 John Heltman 571.403.3847, Allissa Kline 716.243.2679 Families that have direct deposit Hannah Lang 571.403.3855 information on file with the IRS received Community Banking Editor Paul Davis 336.852.9496 John Reosti 571.403.3864, Gary Siegel 212.803.1560 their first monthly payment in mid-July. But Contributing Editor Daniel Wolfe 212.803.8397 the Biden administration has been struggling Kevin Wack 626.486.2341 with how to get the funds quickly to certain

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“It was a pure sprint,” said Bahari Harris, a State Street has the lowest capital retail strategy manager at the Charlotte, North FEDERAL RESERVE requirements out of the eight GSIBs at 8%, Carolina, bank. “This was an opportunity for followed by Bank of New York Mellon at 8.5%. us to say, ‘Hey, let’s think about savings.’” In a release, the Fed also said that HSBC Truist has published tips about what to do Fed sets big- had requested reconsideration of its stress- with the government payments — and about test results after they were published in how saving, paying down debt and buying bank capital June, but that the central bank had upheld kids’ essentials could all play a part. The first those results after an independent group tip is to develop an intentional plan for the reviewed them. The Fed also directed its staff funds. requirements to “conduct a closer examination of issues In the coming weeks, Truist plans to release raised in the reconsideration process” to a podcast about the child tax credit. It is also following further improve its stress-test methodology informing employees at call centers and in going forward. branches about how to answer questions they are likely to receive. stress tests Roy believes that Truist’s ability to provide CRYPTOCURRENCIES face-to-face advice gives it an advantage over By Hannah Lang fintechs that rely on digital channels. “This is August 06, 2021 one example where actually being a universal WASHINGTON — The Federal Reserve has Complaints full-service bank with several thousand published capital requirements for the largest branches actually helps,” he said. banks it supervises that will kick in Oct. 1. about crypto Rockland Trust Company in Massachusetts Goldman Sachs will have to comply with has recently sent emails to customers in the highest capital requirements out of all of an effort to educate them about the child the 34 banks subject to the Fed’s stress tests, are soaring. tax credit. “Some of the audience may have with a common equity Tier 1 requirement of seen a deposit in their account, and not 13.4%. This year’s stress tests examined 23 Is a CFPB have understood what it was,” said Emily banks, with the remainder of the firms on McDonald, a marketing executive at the an “every other year” test cycle. The capital $13.8 billion-asset bank, in an email. “Others requirements for those remaining firms will crackdown may have heard about the child tax credit, be based on last year’s stress tests. but wanted to learn more about the risks or The common equity Tier 1 capital imminent? eligibility requirements.” Rockland Trust is the requirement is made up of the minimum bank subsidiary of Independent Bank Corp. CET1 capital ratio of 4.5%, which applies By Kate Berry Tufano, the business school professor, to each of the 34 banks, combined with the August 06, 2021 has been surveying U.S. parents about the stress capital buffer requirement and, if As the Consumer Financial Protection child tax credit in partnership with the data applicable, a surcharge for the eight U.S.- Bureau sees an uptick in customer complaints analytics company J.D. Power. In a June based global systemically important banks. regarding cryptocurrencies, some observers survey, 55% of parents said that they expect The stress capital buffer — which the Fed say it is only a matter of time before the CFPB the payments to have either a large or very finalized last year — is calculated as the sets its sight on the burgeoning digital-asset large impact on their household finances. difference between a bank’s starting and industry. Some 63% of the tax credit’s recipients projected capital ratios under the “severely Businesses ranging from credit card said they expect to save some of the money adverse” stress-test scenario. The buffer also providers to banks have pushed and by the end of the year, according to Tufano. factors in a bank’s common stock dividends other virtual currencies into the mainstream Another 75% said they would like help from as a percentage of risk-weighted assets. by offering customers more options to buy, their banks on what to do with the funds, the Morgan Stanley will be required to sell and make payments with digital assets. survey found. comply with the second-highest capital But in turn, complaints to the CFPB related The monthly payments to eligible families requirements after Goldman Sachs with a to digital currencies have risen noticeably this — a maximum of $600 per month for a CET1 requirement of 13.2%. HSBC North year. Complaints that are specifically about household with two kids under age five — America has the highest capital requirement the use of a cryptocurrency total 1,433 year will continue through December. The regular among non-U.S. GSIBs at 12%. to date, up sharply from the 979 complaints payment schedule in the middle of each The lowest capital requirements are 7% submitted for all of 2020 and 488 for 2019. month should make it easier for families to for American Express, Capital One Financial, Many consumers described being plan, said Timothy Flacke, Commonwealth’s Fifth Third Bancorp, Huntington Bancshares, unable to access their money held by a executive director. KeyCorp, &T Bank, Northern Trust, PNC cryptocurrency exchange, and complained “Who better than their bank to help them Financial Services Group, Regions Financial, about the back-and-forth with a company draw attention to what’s coming their way?” Santander Holdings USA, TD Group, Truist in their attempts to get any response from he said. Financial and U.S. Bancorp. customer service.

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In June, one consumer said in connection as the inability to access their account or Futures Trading Commission has jurisdiction with a bitcoin service provider, “My make transactions,” Coinbase said in an over derivatives and spot markets for cryptocurrency disappeared from my emailed statement. “Improving our customer cryptocurrencies, the CFPB has jurisdiction account.” Another wrote in June, “No support experience remains a top priority. over consumer protection. assurance that my Bitcoin assets will be We have recently updated our two-factor Many expect the CFPB to flex its muscles returned to my account.” authentication and improved our identity through its broad authority to crack down on Though the CFPB has not issued any verification process to reduce friction for UDAAP. enforcement actions against cryptocurrency account recovery while maintaining our Still, some experts think the industry needs companies or exchanges, the agency tends to security standards.” to reach more of a critical mass for the CFPB mount investigations and issue fines or other The CFPB declined to comment. The last to get involved. penalties against a financial sector after a rise time the bureau weighed in about virtual “It’s not really a consumer protection issue in public complaints. Others in the Biden currency was in 2014, when the agency issued until there’s wide adoption of crypto assets administration, including Securities and a consumer advisory warning consumers being used in payments,” said Dan Quan, a Exchange Commission Chair Gary Gensler, about potential issues with bitcoin and other former head of the CFPB’s innovation office have already shown an interest in taking a cryptocurrencies such as unclear costs, and general partner at Nevcaut Ventures, an tougher stand on the crypto sector. volatile exchange rates, the threat of hacking Irvine, California, venture fund that invests in “Crypto is an area ripe for the CFPB to and scams, and companies potentially fintech startups. test the waters,” said Katherine Kirkpatrick, declining to offer help or refunds for lost or When the industry reaches that point, a partner in the special matters and stolen funds. Quan added, “That’s where the CFPB can be government investigations practice at King & Some experts think the CFPB will most useful, because it’s no longer people Spalding. take action after Sen. Elizabeth Warren, using crypto to speculate.” Observers say the CFPB could subject D-Mass., warned last month of the dangers “If there are bad actors or companies that crypto-related firms to the agency’s authority that cryptocurrencies pose to consumers, just stumble in their compliance, the CFPB to penalize companies accused of “unfair, including the risks of fraud and money could take action and it would most likely be deceptive, or abusive acts or practices.” The laundering. Warren has called for more a UDAAP” violation, he said. federal prohibition against UDAAP is the oversight by the CFPB, citing the abuse Regardless of how cryptocurrency is basis for many CFPB enforcement actions. of consumer finance laws by companies classified, the CFPB can exert its broad “This is a highly volatile space where the promising an easy way for consumers to authority to aid consumers under the Dodd- CFPB is the primary regulator for consumer move money outside the banking system. Frank Act, many experts said. compliance, and there is very little consumer Rohit Chopra, who is waiting for Senate “The CFPB might make the argument that protection,” said Kirkpatrick. confirmation as President Biden’s pick to exchanges are offering consumers financial Earlier this week, Gensler urged Congress be the next CFPB director, is a consumer products and services,” said Kirkpatrick. to give the SEC more authority to regulate advocate and Warren ally. He is currently “Regulators have recognized that this is crypto trading to protect investors, referring a Democratic commissioner at the Federal a space where consumers are confused to the sector as the “Wild West.” Last month, Trade Commission where he called for but eager to participate, [but] there is Treasury Secretary Janet Yellen called on tighter scrutiny of Libra, the Facebook-led little precedent on this, and there is little regulators to develop a response to risks cryptocurrency that debuted in 2019 but is precedent, period, on what the CFPB can or posed by stablecoins. now being renamed by the Association. cannot do.” Just Thursday, The New York Times How the CFPB would take action against Some cryptocurrency trade groups reported that the administration was cryptocurrency companies or exchanges claim that the industry cannot be subject considering Cornell University law professor has prompted a flurry of questions — not to regulation because of the nature of Saule Omarova — who has expressed least among cryptocurrency businesses blockchain technology. Blockchain skepticism about crypto in her academic themselves. transactions are irrevocable if they are sent work — to become the next comptroller of Most cryptocurrency exchanges are outside a cryptocurrency exchange. the currency. regulated at the state level through money Some industry participants are concerned At the CFPB, complaints against one transmission licenses but must also follow about how the CFPB will address the issue of particular company are on the rise. Coinbase, anti-money-laundering rules issued by the consumer transactions in which funds may the largest crypto exchange with more than Financial Crimes Enforcement Network, or be lost. 56 million customers, was the subject of 1,009 Fincen. “You can’t bring assets back on a complaints so far this year, more than triple “With regards to crypto, what is it that the blockchain that you don’t control,” said the total from last year. CFPB seeks to regulate and how would they Kravets. “People self-direct their own custody A spokeswoman for San Francisco-based protect consumers? That’s the question,” said and exchange of crypto, so the consumer Coinbase said the company has increased Alexander Kravets, the U.S. chief executive is responsible for their own actions outside the number of employees responding to of CEX.IO, a London-based cryptocurrency exchanges. But within exchanges there is a customers. exchange. level of assistance that is provided.” “We understand how frustrating it is While the SEC is a primary regulator on CEX.IO, which is licensed in 32 states and when our customers experience issues such behalf of retail investors, and the Commodity by Fincen, abides by “know your customer”

For up to date and complete coverage go to AmericanBanker.com TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 5 requirements, provides custody support in the U.S., and why we have a robust Merchants on Shopify’s e-commerce and transaction monitoring, and can help private sector, is because if something goes platform can offer Facebook Pay as a one- customers address erroneous transactions, wrong we have laws, and people are held click checkout option alongside other saved Kravets said. accountable,” said Rochkind, a former deputy payment methods, including digital wallets “The narrative [within the industry] is that assistant Treasury secretary in the George like Apple Pay and Google Pay. a customer can send crypto to an unhosted W. Bush administration. “At the end of the It’s unclear whether consumers will [digital] wallet and transact in a way not to be day, somebody needs to be accountable be likely to choose Facebook — not yet a captured,” said Kirkpatrick. if something happens, or somebody gets household name in financial services — The CFPB also may take a closer look at the cheated, or technology doesn’t work.” over more established payment options in a proliferation of credit cards offering crypto Some players claim they want to ensure sea of expanding choices. rewards. that consumers are protected, but within the Zuckerberg recognizes these challenges, “Rewards cards are definitely an angle limits of the technology. but he recently told analysts he believes where the CFPB can actually come in and “We are happy to be regulated and provide Facebook Pay could become the most where there may be some communication consumer protections to our customers,” said convenient shortcut for users pivoting and marketing issues, and rewards- Kravets. “But we want to be sure potential between Facebook’s platform and other redemption issues,” Quan said. “But again regulations are common sense and take into e-commerce sites, since they would already those issues could happen to any credit card account the nature of blockchain transactions be logged into Facebook from those devices. rewards programs.” and proper classification of assets.” “When you click on an ad or engage The CFPB also may examine fintech firms with a business, it’s just going to be much that have partnered with banks to convert better to do that natively — whether you’re and spend cryptocurrencies. DIGITAL PAYMENTS in or Facebook or WhatsApp or “It’s a way to spend crypto easily by whatever you’re using — than going to a converting it to actual dollars on a spendable website that doesn’t have your payment debit card,” said Kravets. “The trouble is that Facebook information and isn’t personalized,” it can be expensive upon conversion, kind Zuckerberg said during a July 29 earnings of like flying to Europe and changing U.S. learns from call. dollars for euros at a terrible rate.” Zuckerberg is hedging his bets on how There is a recognition generally that more long it might take for Facebook Pay to gain regulation is coming. Last month, Solidus its mistakes broad adoption. Labs, a New York-based cryptocurrency “We shouldn’t expect that this is going market surveillance firm, hired former in payments to be a meaningful driver of our business CFPB Director Kathy Kraninger to build a or profitability in the near term, it’s just regulatory team as the industry comes under By Kate Fitzgerald going to take a while for that compounding increased scrutiny in Washington. August 06, 2021 to become meaningful numbers,” he told Meanwhile, Yellen is coordinating the Facebook has struggled for years to analysts. effort to regulate and bring enforcement develop a massive, global payments Facebook will have to work to earn actions against various parts of the platform. Its latest effort is far more subtle. consumers’ trust, and since its platform was cryptocurrency and blockchain industry A proprietary Facebook Credits currency designed for sharing the very details that can including stablecoins, exchanges and fizzled many years ago, and the social be used for social engineering, it must also potentially the bitcoin spot market. media giant’s more recent attempts to contend with an influx of fraud attempts. “There are parts of the industry that don’t spearhead development of the Libra global “All a Facebook user has to do to add a new understand the peril that is about to hit cryptocurrency bombed so hard that it had card number is enter the card details and them,” said Dina Ellis Rochkind, an attorney to change the product’s name. create a PIN. With the number of Facebook at Paul Hastings who spent nearly 15 years Consumer trust in largely unregulated accounts, usernames and passwords that working for the House Financial Services social media platforms is weak, and have been breached over time, a fraudster and the Senate Banking committees. “On a Facebook is one of the least trusted of all could very easily take over one’s account positive note, regulation and certainty, will major social networks, according to various and use stolen payment credentials to make legitimize the industry.” surveys. But this time around, Facebook a purchase or create a new account and load She said that cryptocurrency trading took CEO is taking a slower and stolen card data into it,” said David Mattei, a off because consumers wanted to invest more cautious path to market, even if it takes senior analyst at Aite-Novarica Group. in startups that typically were offered only years. Facebook says it uses technology to through private placements or to accredited The new Facebook Pay checkout button spot unauthorized purchases, along with investors. But the concept of a decentralized went live on e-commerce sites for the first advanced data storage and encryption for financial system means, ultimately, that it is time this week, and while Zuckerberg has payment card and bank account details. Its unclear who is responsible when something played down expectations of immediate notification systems can alert users to any goes wrong. success, his long-term vision for the concept unusual activity. “The reason people like to do business seems grand. Facebook Pay made its official debut two

For up to date and complete coverage go to AmericanBanker.com TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 6 months ago with the capability for users advertising, according to another expert. to paying consumers and businesses via to send QR code-powered peer-to-peer “The more consumers use Facebook Pay, Messenger may be integrated into customer payments to anyone on Messenger. Senders the more information Facebook has on service and other commercial functions. can fund P2P transactions via a debit card or those consumers and the more advertising “We have a full road map of deeper PayPal. revenue it can generate,” said Tim Sloane, integrations that I’m excited about in the In recent weeks, vice president of payments innovation at months ahead,” Zuckerberg said. extended Facebook Pay for U.S. consumers Mercator Advisory Service. across Facebook, Instagram, WhatsApp and But many consumers have trust issues its video channel Portal. Once users have with Facebook, given ongoing account WEALTH MANAGEMENT added a payment method to Facebook Pay, takeovers users routinely report, following they can click a “Buy now” tab to purchase years of data breaches. eligible items without having to re-enter “Account takeovers are on the rise PNC rebrands payment details. everywhere and if Facebook can’t protect Zuckerberg plans to get its merchants and those accounts they will fight a growing wealth advertisers to add Facebook Pay globally. backlash,” Sloane said. “Our next phase here is focused on Facebook has already experienced plenty building out shops, marketplace, business of friction in trying to become a payments businesses as messaging and WhatsApp and Messenger to intermediary. create more native commerce experiences The company’s first big foray into lenders vie for across our apps,” Zuckerberg told analysts. payments was in 2009 with Facebook “And as we work our way down the stack Credits, a closed-loop money system from discovery and ads to native commerce enabling users to make online purchases rich clients storefront, we’re also making progress on by loading funds (purchasing Credits) via payments at the same time. So WhatsApp a payment card or PayPal. Facebook took a By Bloomberg News payments are now available to everyone in 30% cut of transactions. August 09, 2021 Brazil, as well as India,” he said. But sellers — including many video game PNC Financial Services Group renamed Analysts say Facebook Pay offers the developers — often have their own in- its wealth businesses and is devoting more company many advantages beyond closer game currencies, creating confusion over staff and financial resources to serving rich connections with users who may rely on the value of users’ Facebook Credits. Three individuals as competition among lenders for the social network’s P2P service for paying years later Facebook shut down Credits affluent clients heats up. friends and family. Facebook could gather and converted users’ balances into local Personal-wealth businesses in the asset- valuable data about its users’ shopping currency, leaving app developers to handle management arm will be consolidated under habits beyond the boundaries of its apps. their own payments. the newly christened PNC Private Bank brand “Facebook’s motivation here is to extend With Facebook’s Libra, the social media headed by Don Heberle, PNC said Monday in its tentacles, increasing user engagement giant cast itself as leader of a consortium to a statement. and capturing more data off-platform, create a new with partners The Pittsburgh-based company will bolster which is an astute move,” said Eric Grover, a that originally included Visa, Stripe, PayPal, the ranks of its wealth employees nationwide, principal with Intrepid Ventures. eBay and Uber. The goal was to build a either placing staff in new markets through There is no additional cost to businesses crypto-based financial system to transform the recently completed acquisition of Banco for accepting Facebook Pay at the moment, the way money moves around the world. Bilbao Vizcaya Argentaria SA’s U.S. business and Facebook is not acting as a processor in But regulatory concerns immediately or expanding its existing footprint. The its current setup. Facebook Pay is managed became a source of uncertainty and Libra’s transaction offers a foothold in the U.S. West by customers’ existing payment processor, partners began bailing out within the first and Southeast, including some of the fastest the company’s website says. few months. At the end of 2020, Libra was growing metropolitan areas in the country, Payment fees are understandably rebranded as Diem with a broader focus on according to data compiled by PNC. less important to Facebook at this point stablecoin development, with 27 companies “When we think about where we want than building frictionless bridges with participating in the Diem Association. to take our wealth business — really, our e-commerce platform providers, Grover Facebook presaged its latest payments entire asset-management business — the said. ambitions in August 2020 with the unveiling most exciting thing for us about the BBVA “With its enormous global network, of Facebook Financial — codenamed F2 acquisition is that it allows us to establish a Facebook still has the greatest payments internally — headed by Libra co-creator presence in all of these attractive markets,” potential of any U.S. tech titan, and if and David Marcus, formerly the president of asset management chief Carole Brown said when it achieves payment critical mass it PayPal. in a phone interview. may revisit the business of payment fees,” Facebook has not disclosed how many The planned personnel changes will be Grover said. consumers use Facebook Pay for P2P accompanied by investments in technology Facebook Pay also stands to enhance transactions, but Zuckerberg suggested to and administrative capabilities. The bank Facebook’s core revenue source of analysts that the QR code-based approach will also beef up family office services for

For up to date and complete coverage go to AmericanBanker.com TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 7 the ultra-affluent. It declined to spell out the The largest U.S. bank, which often sets scope of that spending and the additions to policies ultimately adopted by the broader CLIMATE CHANGE its workforce. financial industry, announced the change in The move by PNC comes as banks work a memo to staff Friday. The firm told its U.S. to win over clients who reaped windfalls office workers in May that they don’t have Small bank thanks to a raging stock market rally fueled to wear masks if they’re fully vaccinated by government stimulus, as well as surging against COVID-19, but the rise of the highly seeds green home prices. transmittable delta variant and a change Bank of America last month said it had in official U.S. guidance upended that increased its private wealth staff in Florida by approach. lending with 40% as it seeks to double its presence there. “If you are fully vaccinated, you are JPMorgan Chase plans to boost the number required to wear a mask in any common assist from of advisors in its traditional broker business area within our buildings, including when by more than 500 to 1,000 in the next five walking between desks/moving around years. Citigroup and Deutsche Bank AG are the floor, on elevators and in pantries, fintech also beefing up wealth-management units. cafes, lobbies, etc.,” Chief Executive Jamie “It’s an attractive sector,” Brown said, Dimon and the rest of JPMorgan’s operating By Miriam Cross noting that her business offers the highest committee wrote in the memo. “You may August 06, 2021 returns of PNC’s three segments despite being remove your mask in conference rooms or Virginia Community Capital Bank in the smallest of the trio. “The opportunity I at your workspace where you can socially Richmond prizes the clean energy lending think that all of us are trying to position for is distance.” program it launched five years ago. But as this multitrillion-dollar wealth transfer that’s Companies across the U.S. have been a small community development financial happening and will continue to happen over adjusting return-to-office plans after the U.S. institution, it lacked the resources to find the next decade.” Centers for Disease Control and Prevention socially minded depositors at the scale it Brown said that robust capital markets last week urged fully vaccinated people to wanted to fund its solar loans. contributed as the asset-management arm go back to wearing masks indoors in places Ando, a challenger bank that focuses on posted double-digit gains in the second where infections are rapidly climbing, sustainability, is finding them instead. quarter from a year earlier. She also credited including New York City. The San Diego fintech has the trappings investments and strategic moves. The biggest Wall Street banks have so far of a typical neobank: no monthly fees, early “A lot of it is the work we did to streamline stopped short of requiring employees to be direct deposit and interest rates that grow in and focus our business,” Brown said, citing vaccinated, though some have warned they exchange for referrals. But its mission is to investments in technology and the sale of may do so. That contrasts with Silicon Valley fund clean energy, sustainable agriculture funds that didn’t mesh well with operations. giants such as Facebook and Google, as well and other green loans made by partner as the state of California and New York City, banks, of which the $233 million-asset which have said government employees will Virginia Community Capital (which markets WORKFORCE MANAGEMENT need to be vaccinated or tested weekly. itself as VCC) is the first. At JPMorgan, employees who aren’t “It’s always been my dream at VCC to vaccinated must wear their masks in the match impact-minded deposit customers JPMorgan office at all times, removing them only directly to the solar loans that we do,” said when socially distanced at their workspaces Bill Greenleaf, the bank’s real estate lending brings back or when eating or drinking and socially team manager and clean energy loan distanced. They can’t attend indoor officer. “We just don’t have the technology employee events with 25 or more people infrastructure or the marketing resources to its mask and must be tested twice a week, according find individual depositors that want to focus to Friday’s memo. on clean energy.” mandate for JPMorgan and rival Goldman Sachs The program is relatively small, and the Group have been leading the charge to partnership Ando and VCC have formed is repopulate offices, putting pressure on rare, but they highlight the creative ways vaccinated rivals to do the same. Citigroup went back financial institutions — even small ones — to requiring employees to don masks in can find to support growth and draw in a new employees the office, regardless of vaccination status, generation of socially conscious customers. Bloomberg reported last week. Morgan “You see more grassroots efforts to make By Bloomberg News Stanley is barring unvaccinated employees the retail consumer understand they have August 06, 2021 from entering its offices in the New York more options and that, especially around JPMorgan Chase brought back its mask area, according to an internal memo in June. climate issues, they can do something requirement for vaccinated employees after positive even with their checking account,” ditching it earlier this year. said Lauren Compere, managing director

For up to date and complete coverage go to AmericanBanker.com TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 8 at Boston Common Asset Management, an modifications to their lifestyle, such as expected outcomes. environmentally conscious investment firm. switching to electric cars and reducing meat For now, Ando will make money from Banks are already taking steps to in their diets, but they were troubled by the interchange revenue and out-of-network decarbonize their portfolios and help idea that “our money was working against ATM fees. McNeill said he plans to launch investors identify sustainable options. us,” McNeill said. “We realized that banking other revenue-generating products in the Amalgamated Bank recently reinforced its can be a force for good.” future. commitment to social and environmental The name Ando is a Spanish term values; Citizens Financial Group and MUFG meaning “the way” or “the walk.” Union Bank announced deposit products “The idea being, there is a new way to do DEPOSITS for their business clients where the funds something people have taken for granted,” will go toward environmentally friendly said McNeill. projects. But the partnership between a The challenger bank joined forces with Brex brick-and-mortar bank and a fintech in this VCC in March, operated in beta until April space is unique, said Compere. and started marketing its product in May. withdraws “I think we will see more models like this,” McNeill won’t disclose the number of she said. “There is a focus on appealing to customers but says that Ando is onboarding customers who want more transparency more than 5,000 customers per month and applications about how their bank deposits are used. has seen 15% customer growth month over Customers also want to feel like they month. About half of its customers come for industrial are having an impact with their bank from referrals. A more recent addition to relationships overall.” its growth strategy is its partnership with Small and regional banks may find it the rock climber Alex Honnold, who will bank easier to leverage local networks and be promote Ando and sustainable banking on more intentional about their loans. social media and create his own initiatives By Brendan Pedersen VCC sources its borrowers from a with Ando. August 06, 2021 network of solar installers who refer McNeill’s goal is to align Ando with other WASHINGTON — Brex has withdrawn them to businesses, such as wineries or community and regional banks and credit its applications to form an industrial manufacturing companies, typically in the unions across the country to fund sustainable loan company and obtain federal deposit District of Columbia, North Carolina or loans. Since it forged its partnership with insurance for it. It’s the latest fintech to Virginia. The bank then underwrites and Virginia Community Capital, Ando has be handed a setback in the pursuit of an closes the loan, after which Ando will make signed agreements with three other banks. industrial bank. a deposit equal to that amount. It lets the financial institution identify and Brex, a financial services platform catering Greenleaf has his eye on lending to underwrite loans, after which Ando will to startups, in February applied to the state projects with a social impact. One example communicate to its customers how their of Utah for an ILC charter and to the Federal is Solar for All, an initiative by the D.C. money is reducing emissions. Deposit Insurance Corp. for deposit coverage. government to provide low- to moderate- Pie charts in the Ando app show customers In a statement Friday, a spokesperson for the income families with locally generated where their money is currently going with San Francisco company said that Brex had energy. the VCC partnership (84% to commercial “voluntarily withdrawn its bank charter and With the help of Ando, Greenleaf expects clean energy loans and 16% to residential) federal deposit insurance applications. This to double the clean energy loans he makes and break down Ando’s future funding will permit us to modify and strengthen our this year. So far, he has completed $7 million plans, which are evenly divided between application and resubmit at a later date.” of solar loans for entities such as charter clean energy, sustainable transportation, “We appreciate the support and thoughtful schools, churches and nonprofits. green buildings, sustainable industry and guidance from the Utah [Department of “Having a dedicated funding source helps sustainable agriculture and forestry. Case Financial Institutions] and FDIC,” the us keep up with the growth in the solar studies on the Ando website detail the spokesperson added. lending space,” he said. Virginia veterinary clinic, California schools Brex is one of several fintechs to attempt He is also feeling out ways to advertise and other entities that benefit. an entry into the banking system by way of this partnership. “The idea is for the consumer to an ILC charter in recent years. The FDIC “I’ve started doing that with a few understand how they are a stakeholder in broke a decadelong freeze on new industrial customers — ‘Your loan was funded by a this whole process,” McNeill said. banks in March 2020, when it granted deposit deposit through this new fintech called “I like the level of transparency provided,” coverage to the payments firm Square and Ando, and they are collecting deposits from Compere said. “I think the demand will the student loan servicer Nelnet. retail consumers across the country,’” he increase for impact metrics that show Before applying for an ILC, the fintech said. “My customers are pretty excited about how your deposit is allocated.” As more had offered financial services to its clients i t .” partnerships emerge, another level of via bank partnerships, including UMB The founder and CEO of Ando, JP McNeill, transparency may be in demand: third-party Financial, Radius Bancorp (now owned by said his family has made sustainable certification that monitors the impact and LendingClub) and Bank of the West.

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ILCs, also known as industrial banks, have lawyers are paid, if all 98 million people file been a raw nerve for the mainstream banking a claim, they will get about 60 cents each. BANKTHINK industry for years. Though few in number, (In these types of settlements, typically not ILCs are one of the last kinds of banking everyone makes a claim. However, in this charter that can be held by a commercial case they will be given the option of receiving For card entity rather than a bank holding company the settlement money automatically through — which means that such banks can avoid Venmo and PayPal rather than strictly issuers, direct oversight from the Federal Reserve. through a check, which could result in more The potential for a lighter regulatory claims.) burden has made the industrial bank an The plaintiffs claimed that Plaid’s user Fed’s Durbin appealing route into the financial system interface mimicked the login screens of an for some fintechs, while commercial banks individual user’s financial institution and proposal sows — particularly smaller community banks — that users were uninformed that they were have argued that ILCs blur the traditional not actually logging in via the bank’s own separation between banking and commerce platform. Plaintiffs said they unwittingly confusion in the American economy. gave Plaid their financial institution login Nearly every industrial bank applicant in credentials and that Plaid would retain By Keith Ash and Myron Schwarcz recent memory has been forced to withdraw access to their credentials and use them to August 06, 2021 and refile applications at least once, including mine, aggregate and then sell users’ financial Banks and credit unions that issue debit Nelnet and Square. Others, such as Rakuten transaction data to third parties. cards should brace for a range of challenges Bank America, have had to resubmit their In the settlement, Plaid committed to if the Federal Reserve advances a plan to applications several times and continue to improve data deletion and minimization, amend certain regulations for card-not- wait for approval. improve disclosures, and continue to host a present transactions. dedicated webpage with detailed information The Fed has proposed clarifications to the about its security practices. Durbin amendment’s Regulation II, which DATA SHARING Data minimization, in this case, is ensuring required the agency to place limits on the that no extra data is pulled than is needed for fees banks can charge retailers for debit card the fintech app’s purposes. Data deletion is transactions. The Fed has suggested that Plaid settles eliminating any unneeded data that may have one change, requiring that card-not-present been accidentally collected. For instance, if transactions must be capable of being class-action an app is using Plaid for authentication and processed across at least two competing needs merely an account routing number, networks, would be “non-substantive” in Plaid is committing to only taking that terms of new obligations and compliance. lawsuit for number. If any other data is collected in the A glance at the more than 450 comments process of screen-scraping the consumer’s to date shows that this has become the latest $58 million account, it will be deleted. battleground between issuers and merchants Plaid has said that it hopes to have 75% over interchange and enforcement of Reg II. By Penny Crosman of its traffic committed to bank application If this proposal is enacted with no further August 06, 2021 programming interfaces by the end of this clarifications, the implications for issuers Plaid has settled a class-action lawsuit in year. The use of APIs should eliminate all could be very substantive from contractual, which consumers alleged that the company the complaints raised in the lawsuit, the financial, and compliance perspectives, used dubious tactics to gather bank account company said. making this a topic bankers need to monitor data to share with fintech clients. Under the “If you think about the trajectory of where closely for a potential impact on their terms of the agreement, the San Francisco Plaid was five or six years ago, versus where bottom lines. data aggregator has agreed to establish a $58 we are now and where we’re headed to the To fully understand the current million settlement fund and make changes to future, this really clears the decks for us to environment, a brief history lesson is its business practices and policies. continue moving forward and moving in in order. The Durbin amendment in the This settlement encompasses five class- this API- bank partnership direction and Dodd-Frank Act gave rise to Reg II, which action lawsuits that were combined into this commitment to really strong, industry established standards to ensure issuers one. All alleged that Plaid used consumers’ leading transparency and control tools for participated in at least two unaffiliated debit banking login credentials to harvest and sell consumers,” said John Pitts, Plaid’s head of networks and that debit card interchange is detailed financial data without the users’ policy. “The settlement opens up the ability “reasonable and proportional” to costs for consent. for us to continue moving forward in that issuers with at least $10 billion of assets. The settlement affects an estimated 98 direction and double down on our investment The result was an immediate and million people for whom Plaid screen- in that approach to the ecosystem.” dramatic reduction in debit interchange scraped data from a bank account to be rates for institutions with more than $10 fed into a fintech app like Venmo. After the billion of assets — particularly for dual-

For up to date and complete coverage go to AmericanBanker.com TUESDAY AUGUST 10, 2021 AMERICANBANKER.COM PAGE 10 message (signature) transactions, which has raised questions around compliance today stand at barely one-third of 2011 obligations issuers will need to monitor. levels. In percentage terms, interchange How can issuers ensure that every merchant rates remain lower for every major debit accepts both of their card payment category compared to a decade earlier. networks? Does an issuer need to support The result was a windfall for merchants all merchants even if one is considered — at the expense of card issuers and high risk? How will innovation be handled consumers. Though the legislation was sold if only one network supports an emerging as pro-consumer, the Fed’s own research capability? suggests merchants did not pass on any The proposal could also prove bedeviling savings to consumers. With margins severely for smaller credit unions and banks. If the curtailed, issuers cut card rewards programs past is any indication, the revenue fallout and the number of unbanked Americans from lower interchange could have the rose substantially. greatest impact on smaller institutions. If When Reg II was created, the Fed believed card-not-present volume shifts from national the market for card-not-present transactions card networks to regional card networks, was not mature enough to have solutions to smaller issuers could potentially run the support two unaffiliated networks for online risk of failing to meet certain contractual transactions, so the agency was silent on the obligations and commitments with their issue. While some domestic debit networks networks. The net result of this potential now support card-not-present transactions, change could be rapid consolidation among the business case for enablement is murky, community banks and credit unions and an and certain issuers have elected not to opt increase in unbanked Americans. in. So, the Fed has said it feels such practices While debit interchange rates are not part are inconsistent with Reg II and must be of the proposed changes, the Fed left the addressed with this clarification. door open, stating it will continue to review In theory, the current conversation is the regulation and may propose more limited to Durbin’s requirement that issuers revisions in the future. And Sen. Richard make at least two network options available Durbin, the Illinois Democrat for whom for all debit transactions, which has not the amendment is named, brought up the always been the case for the fast-growing topic of credit interchange in the Judiciary card-not-present category. But industry Committee earlier this year and he seeks advocates have used the Fed’s comment bipartisan support for further refinements window to revisit broader grievances tied to to Reg II, including a potential expansion to interchange. credit transactions. Retail associations and merchants like Issuers should watch and plan for the Kwik Trip want the Fed to step in, from an proposed changes by taking inventory of enforcement perspective, and mandate that their existing relationships and evaluating two networks be enabled as early as the the implications of probable change holiday season. They also want the Fed to occurring as early as next year. reexamine the regulated interchange rate, New contractual relationships should be arguing that issuer costs have declined by carefully considered, including commercial almost 50% since the ceiling was set in 2011, terms, given the uncertainty. Issuers should with no adjustments having been made. actively engage their government relations Issuers and associations like the areas and make this issue a priority at the American Bankers Association and the local and national level, while working with National Association of Federally- Insured their associations. We encourage issuers to Credit Unions caution that the proposal submit feedback to the Fed by Aug. 11. could have unintended consequences for safety and security, and a financial impact Keith Ash is a senior vice president for similar to the original Reg II rollout. They client development with Strategic Resource have strongly suggested that the Fed take Management. more time to analyze the potential impact to Myron Schwarcz is executive vice president issuers and consumers. of Strategic Resource Management. q Practicality is another consideration. Depending on how the Fed interprets the © 2021 Arizent and American Banker. two-network requirement, the proposal All rights reserved.

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