CardCon 2023 Recap

Last week, our team from Totavi enjoyed attending CardCon in Nashville. We learned a lot from the insightful panels, saw old friends, and enjoyed a spirited interchange debate.

Networking remains a cornerstone of these events. I noticed at least three or four panels explicitly focusing on it. In the fintech and card sectors, which are relatively tight-knit, the importance of maintaining connections is paramount. Despite the common knowledge about the value of staying in touch, keeping those connections active is often a challenge.

The conference's standout moment was undoubtedly the debate on The Proposed Credit Card Competition Act. Doug Kantor's assertion about a lack of competition in credit card processing since Discover's entrance in the 1980s sparked significant debate. However, this view overlooks the significant strides made by entities like Venmo, PayPal, Accel, and others in recent decades. The lively discussion highlighted the various nuances of the Act and its potential implications for consumers. Rewards blogger and analyst Gary Leff did a great job arguing against the bill, and the room came in with a clear preference.

The pro-CCCA camp argued that the bill does not explicitly govern fees; it forces banks to put at least two networks on the card and allow the merchant to choose routing. (Also of import, the two networks couldn’t be Visa and Mastercard.)

There is a lot of competition in payments, which already drives innovation and value to consumers and merchants. Many folks aren’t aware that major national chains can already negotiate their own payment acceptance rates (we all know folks like Walmart and Amazon are not paying the standard rate).

Banks can participate in many networks. Merchants can accept many networks. Consumers can use many cards (or no cards at all). Digital wallets like Venmo and Cash App are becoming point-of-sale payment solutions. Consumers should choose what they pay with (and the network on their card), and merchants can choose what to accept. To say that a merchant should get to choose the network is a step too far.

We helped to organize a panel titled "The New Secured Cards: Assets, Not Cash," which delved into the innovative world of fintech and secured credit cards. There's a common misconception that secured cards are predatory. However, initiatives by companies like Mastercard and fintech innovators such as Pesto*, Yendo, and Vie challenge this notion. These entities are introducing non-predatory products that secure credit lines with assets other than cash. This approach is a refreshing change from traditional models while still aligning with the core principles of the card industry and avoiding the repossession business.

We’ll see you next year in San Antonio!

Regions New Fintech Partnership with Self

Last week, Regions announced a new partnership with Self Financial, allowing customers to have “rent, cell phone, and utility payments reported to the three major credit bureaus.” This partnership aligns with the ongoing trend in credit-building products we've observed this year.

What's intriguing about this announcement is its focus on credit building through rent payments and cell phone and utility bills. While the market has seen a surge in services that emphasize rent payments for credit building, including cell phone and utility payments, it is less common, though not unheard of. The standout features of the Regions Bank and Self Financial partnership are its affordability and bank-led approach. Their monthly fee will be $6.95, whereas other similar credit building services charge anywhere from $15 to $27 monthly. This initiative also marks a departure from the norm, where we usually see new fintech startups launching co-branded products.

In recent years, there's been a noticeable shift towards credit-building and reward-generating products linked to rent payments. Innovations like Built, Pinata.ai, RentPlus, and Get Flex have entered the market, enabling individuals to not only build or establish credit through rent payments but also to reap rewards for their financial diligence.

This partnership between Regions Bank and Self Financial indicates that traditional banking institutions are adapting to the changing financial landscape and trying to differentiate themselves. We will be curious to see how other banks adapt over the next few years.

Citibank Discrimination

The CFPB fined Citibank 25.9 million dollars for intentionally discriminating against Armenian Americans. Citibank. To quote:

Citi treated Armenian Americans as criminals who were likely to commit fraud. From at least 2015 through 2021, Citi targeted retail services credit card applicants with surnames that Citi employees associated with Armenian national origin, as well as applicants in or around Glendale, California. The bank specifically targeted surnames ending in “-ian” and “-yan.” Nicknamed “Little Armenia,” Glendale is home to approximately 15% of the Armenian-American population in the U.S.

Discrimination is wrong.

I live in Pasadena, next door to Glendale. The L.A. region, specifically Glendale, is a huge center of the Armenian diaspora. Every society, ethnicity, national origin, etc., has criminals in its midst. Are there people in Glendale who commit credit card fraud? For sure. I’ve seen these cases myself. Should all people of Armenian descent be denied credit cards because of where they live and what their last names are? No. I was shocked and disgusted by this news. Kudos to the CFPB for this fine. Shame on Citibank.

Credit-Cards-as-a-Service Market Analysis

Hot on the heels of our recent release, we're now offering a preview of our Credit-Cards-as-a-Service Market Analysis. This sneak peek allows you to check out critical highlights before purchasing. Dive into the insights and data that make this report a must-read for anyone in the card industry. Visit our website to access the preview and use the code “cardsftw” for a discount when you purchase.

Cards, WTF?

Welcome to our new feature, which we tested and debuted at CardCon: CardsWTF. We love cards. Cards For the Win! Sometimes, we are scratching our heads, though, and it’s time for Cards, WTF?

We all know that Dick Durbin hates interchange. The retail lobby has him convinced that small merchants are such bad business people that if only big bad banks would not charge fees for accepting card payments, the country would be a better place. After all, Regulation II, which governs the cost of accepting a debit card for all bank issuers with more than $10 billion in assets, is known as the Durbin Amendment because he added it to the legislation.

Dick Durbin hates credit card fees, too. He is a sponsor of the previously mentioned Credit Card Competition Act.

Dick Durbin is also surprised to find that airlines and hotels devalue their points! He wrote a letter (PDF) to the CFPB and the Department of Transportation complaining.

WTF, Dick Durbin? You can’t have it both ways. If you squeeze one part of the balloon, something has to give. If you squeeze interchange, banks and loyalty programs will find a way to maintain profitability. Devaluing points isn’t fun, but I don’t think we need to legislate it.

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CardsFTW

CardsFTW is a weekly newsletter, released most Wednesdays, that offers insights and analysis on new products in the credit and debit card industry for both consumers and providers. CardsFTW is authored and published by Matthew Goldman and Ellen Perl of Totavi, LLC. Totavi is a boutique consulting firm specializing in fintech. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

*Indicates a company where Totavi, LLC has a business relationship.