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About


Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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October 24, 2022

What the Payment Choice Act Means for Cash

Since the first paper billsOff-site link emerged in the United States in 1690, cash has been a payment choice for governments, merchants, and consumers in our nation.

The pandemic, though, changed things for cash users. Notices appeared at merchant locations like coffee shops, restaurants, and other retail sites throughout the country: "Credit or Debit Card Only" or "We are going cashless!" Merchants may choose not to accept cash for a variety of reasons, including hygiene concerns, banking office closures or reduced hours that often made it harder to get cash for the till, and coin supply issues that made it hard to make change even when cash was accepted. Surprisingly, even as the pandemic's influence is lifting, some merchants still refuse to accept cash.

However, that may change with the Payment Choice Act of 2021 (H.R.4395), introduced on July 9, 2021, and sponsored by Rep. Donald M. Payne Jr. (D-New Jersey). The proposed legislation is designed "to prohibit retail businesses from refusing cash payments, and for other purposes." The bill passed in the house twice: first on June 21, 2022, as an amendment to the Financial Services Racial Equity, Inclusion and Economic Justice ActOff-site link, and on July 14, 2022, as an amendment to the National Defense Authorization ActOff-site link. The bill would need to be passed by the SenateOff-site link to be enacted and we will keep an eye on its progress. A similar bill, Cash Always Should Be HonoredOff-site link, was introduced in 2019 by Rep. David Cicilline (D-Rhode Island), who was concerned that cashless businesses discriminate against customers who do not have access to a credit card. The bill did not move forward but the PCA captures the original intention.

Key points in the Payment Choice Act include:

  • Requires retail businesses—those that sell or offer goods or services at retail to the public and accept in-person payments at a physical location—to accept cash as a form of payment for sales in amounts less than $2,000
  • Prohibits them from charging cash-paying customers a higher price compared to customers not paying with cash
  • Provides for enforcement through preventative relief and civil penalties

Our work in payments inclusion informs us that cash is a primary payment choice for about 7.1 million US households (5.4 percent)Off-site link that choose not to use banks. These rates are highest among low-income, Black, Hispanic, Native Americans, and people with disabilities. When cash is not accepted, it can create a barrier that excludes primary cash users from the payments system and from getting needed goods and services. This can create hardship for people and may also result in loss of business for merchants.

But isn't cash acceptance a requirement? The answer is no. While cash is US legal tender, merchants don't have to accept it. According to the Board of Governors of the Federal Reserve SystemOff-site link, "there is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services."

Some states and citiesOff-site link (New Jersey, Colorado, Washington, DC, New York City, Philadelphia, and San Francisco) have enacted similar merchant cash acceptance policies. Other states, like GeorgiaOff-site link, have bills pending. These legislative actions create a mandate for businesses that may override their choice to not accept cash as a payment option while protecting consumers' preferences to use cash. What do you think?

October 17, 2022

Webinars Address ATM Crimes, Financial Exploitation

ATM attacks don't generally appear in the news, despite their growing threat. As we've written before, these attacks can be both cyber and physical, and the physical attacks can be against both machine and the personnel servicing the machine. Another disturbing crime that may not appear enough in the headlines is the financial exploitation of senior adults. Two upcoming events in our Talk About Payments webinar series will give you the opportunity to learn more about these issues from the experts. The first, on November 3, covers ATM attacks. The second webinar takes place the following week, on November 10, and addresses the exploitation of seniors and community-based approaches to help mitigate vulnerabilities. More details about these webinars, as well as registration links, are below. We hope you will join us for both events.

November 3: ATM Attacks and Defenses
Because many financial institutions have closed or reduced the operating hours of many of their banking offices since the start of the pandemic, customer withdrawals of cash from ATMs have increased significantly. Unfortunately, the criminal element has shifted some resources to attacking ATMs and the personnel servicing them, including those who make currency deliveries. More than half of all ATM attacks in the United States involve thefts of the ATMs themselves, according to ATM Security Association data. The growth in dispenser jackpotting is also troubling. Because the methods of ATM crime can vary from city to city and month to month, it is critical that that ATM operators stay informed about current trends.

A panel of ATM experts join moderator David Tente, executive director of the ATM Industry Association, in discussing trends in cyber and physical attacks against ATM terminals and service personnel along with measures that can mitigate the risks. The panelists are:

  • Brenda Born, supervisory special agent, Federal Bureau of Investigation
  • Brad Moody, executive vice president of operations, Lowers & Associates
  • John Toneatto, vice president of security and investigations, Loomis

The webinar takes place on November 3 from 1 to 2 p.m. (ET). To participate in the free webinar, please registerOff-site link.

November 10: Financial Exploitation of Aging Adults
Did you know that more than 10,000 US adults turn 65 every day, and that many of them will be victims of financial fraud? Elder financial exploitation is a growing problem, according to the National Council on AgingOff-site link, which estimates financial losses of at least $36.5 billion dollars a year. With the rapidly aging population, we must identify and protect elderly citizens exposed to financial exploitation risks.

In the November 10 episode of our Talk About Payments webinar series, Drs. Thomas Blomberg and Julie Brancale, criminologists from Florida State University, describe the current research, theory, and policy responses associated with this growing social problem. They also address the patterns and variations of financial exploitation of older adults and discuss why some older adults may be more or less vulnerable than others. The presentation concludes with a discussion of areas in need of additional research and policy attention. Scarlett Heinbuch, a payments risk expert at the Atlanta Fed, moderates the discussion.

The webinar takes place on November 10 from 1 to 2 p.m. (ET). To participate in the free webinar, please registerOff-site link.

We encourage financial institutions, retailers, payments processors, law enforcement officials, academics, and other payments system stakeholders to join us for these informative webinars. You will be able to submit questions during the webinar. Please let your colleagues know about these webinars!

October 3, 2022

CFPB Releases Report on Buy Now, Pay Later

In 2021, the five major firms offering buy now, pay later (BNPL) loans originated approximately 180 million loans, with a total value of $24.2 billion and an average value of $135. That's according to a long-awaited report Adobe PDF file formatOff-site link on the US BNPL industry from the Consumer Financial Protection Bureau (CFPB). This report resulted from an increasing number of consumer complaints about BNPL, primarily about fee disclosures and problems with merchandise returns, and requests from some congressional figures. (Read my August 1, 2022, post on BNPL for a refresher on what led to the report.)

The full report provides detailed information about the state of the BNPL industry in the United States over the 2019–21 period. Here are some other findings in the report that I found interesting:

  • While the apparel and beauty sectors still dominate the markets that BNPL lenders serve, their share dropped from 80 percent in 2019 to 59 percent in 2021. Personal effects—which include electronics, fitness and sporting equipment, games and hobbies, and jewelry—made up the second largest segment, at 11 percent of the market.
  • From an underwriting standpoint, 73 percent of the BNPL offers in 2021 were approved, with a charge-off rate of 3.8 percent, up from 2.9 percent in 2020.
  • By the end of 2021, three of the five lenders were imposing late payment fees, which were in the $7 to $8 range. A fourth lender had charged late fees for most of 2021 but discontinued them in the fourth quarter. For the three firms still charging late fees at the end of the year, about 12 percent of borrowers incurred at least one late fee in 2021, and 7 percent of loans incurred at least one late fee.
  • Late fees represented on average 0.28 percent of the BNPL firms' gross merchandise sales.
  • As the chart shows, debit card dominates the payment methods, while check, at less than one-tenth of 1 percent, is the least frequent choice.

  • table 01 of 01: Payment method

  • In 2021, only 60 percent of the dollar value of the merchandise value returned or disputed was refunded, up from 45 percent in 2019. This has been a major source of customer complaints.
  • Discount fees paid by merchants have dropped steadily since 2019 as additional BNPL firms have entered the market. In 2019, the average discount fee was 3.39 percent. It was 2.91 percent in 2020 and 2.49 percent in 2021.

We will report on the business trends cited in the report as well as the CFPB's planned next steps in our next post on this subject.

September 26, 2022

Next-Generation ATMs: Innovations and Updates

Despite the growth of digital payments, cash remains a vital payments instrument, as we have frequently discussed in our posts. And people often get their cash from ATMs, as we've also mentioned here a few times. At a recent conference, we learned more about the latest technologies in the next generation of these machines and in the software that goes into the machines, and heard updates on policies and crimes that Independent ATM deployers (IADs) may encounter. Here are some of the key takeaways from the conference:

  • ATM functionality: Looking for new revenue sources, ATM deployers are evaluating enhanced devices that will support bill payment and other functions for the cash-based customer. With these upgraded ATMs, customers will be able to pay their bills by scanning their bills and inserting cash into an ATM. If this service is priced below what a staffed money service business offers, it will be an attractive alternative.
  • Artificial intelligence: The next-generation ATMs are supported by more sophisticated machine-learning software that can diagnose common problems remotely such as PIN pad errors, provide low- or out-of-cash alerts, reboot systems, arm or disarm alarms, or configure alerts based on the route of the IAD operator. Using this adaptive machine learning, it can often fix these minor problems, saving time and money in avoiding a service call and keeping the ATM functioning and available. Some problems like paper jams, though, will still require an old-fashioned intervention.
  • Crime: While innovations in ATMs and the software that supports them are on the rise, the need to solve for old-fashioned problems like crime remain. The number of attacks against and thefts of ATMs, including attacks on the people who service them, are increasing. Alarms, cameras, and other crime-alert features, such as locational tracking, are often not enough to stop determined criminals. This problem has become so severe that our next Talk About Payments webinar on November 3 will examine these issues and offer some potential defenses in detail. Stay tuned for more information on these webinars in the coming weeks.
  • Music, money, meals: On a lighter note, if you think you’d like to listen to music when you withdraw money from an ATM, you’ll like the new combo jukebox/ATM that plays your favorite tunes and dispenses your cash. The combo is designed to be used in restaurants, entertainment facilities, and other venues where the patrons will be able to stay a while to listen to their favorite tunes.

The conference was a fascinating convergence of technologies, policies, and people. It was also a reminder of the industry-wide commitment to the efforts being made in all areas to keep cash accessible. Some sessions focused on key legal and regulatory issues the industry is facing. We will write more about those in future posts. You can count on us to monitor this banking channel and continue reporting on the evolution of the ATM.