The Regulators Are Watching

by Ben Jackson 0

In a published version of a talkshe gave that the Federal Reserve Bank of Philadelphia PaymentCards Center Conference on Dec. 2, Fed Governor Elizabeth A. Dukeputs the prepaid industry on notice that the Fed is watching.

“Depending on the card type, theissuer, the purpose of issuance, the payment collection network,and the form of access, payments made using prepaid cards or otherdevices may be governed by different regulations and interchangefee restrictions,” Duke said. “Consumers cannot be expected to knowthese differences. It will be important for regulators to monitor,over time, the effect of difference in regulation and pricingrestrictions to ensure that consumers are adequately protectedregardless of their payment method preferences.”

She also said that the FederalReserve is monitoring the emergence of mobile payments “to ensurethat adequate consumer protections are put in place as thetechnology is adopted more broadly in the marketplace.”

So, the payments industry is onnotice that the Fed is watching and plans to continually update itsregulations. While this probably strikes fear in the hearts of someand annoyance in the hearts of all, the industry should look atthis as an invitation to a conversation. Rather than waiting forregulators to respond to what is happening in the industry, theindustry itself should be actively engaging the regulators to makesure that its concerns and needs are addressed.

Duke’s remarks center on consumerprotection, but changes like interchange fee restrictions onlyaffect the consumer indirectly as companies respond to the changes.While the traditional approach to dealing with regulators is anadversarial one, as prepaid and mobile payments become a biggerpart of the payments landscape, the industry should inviteregulators to its conferences, its meetings, and even its investorpresentations so that they understand how the business works andthe value that these offerings provide consumers.

For the full text of Duke’sremarks, please visit:http://www.federalreserve.gov/newsevents/speech/duke20101202a.htm

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