The Fed's real-time payments system; Sen. Wyden wants answers from Amazon

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May the best system win
The Federal Reserve voted 4-to-1 build a new real-time payments system, “providing a public option to another real-time network built by big banks. The new system would allow bill payments, paychecks and other common consumer or business transfers to be available instantly and round-the-clock, a change from the government’s current system that is closed on weekends and can at times take days to settle a transaction.” The new system, called FedNow, is expected to be available in 2023 or 2024.

“Big banks had waged a lobbying effort to stop the Fed from developing the new system,” the Wall Street Journal noted. The banks “have invested a total of about $1 billion in their own instant-payments system, launched in 2017 and operated by Clearing House Payments Co. They argued a competing Fed system would delay the spread of faster payments, with some smaller banks likely to wait until the central bank launches its system.”

But “the Fed’s decision was supported by small banks, big technology companies and Democratic lawmakers.”

Fed governor Lael Brainard said “a single, private-sector real-time payments service would create risks, because it might not provide equitable access and there would not be a backup should it fail. Having a competing system could lower prices, improve service quality and increase innovation.”

Big banks “fear that Silicon Valley companies could use the Fed system to push their way further into the banking world,” the Washington Post said. At the same time, “America’s payment system lags behind many parts of the world, and U.S. banks are concerned about being left behind.”

Small banks have waited years for the Fed to build its own real-time payment system. But the real wait is just starting, American Banker said.

“The announcement ended years of uncertainty about whether the central bank would take a hands-on role in a modern U.S. payments network or instead defer to the private sector,” American Banker added.

Time for a change
The stock of HSBC, which ousted its CEO John Flint “after barely 18 months in the job,” “has fallen dramatically,” the Journal notes. “It traded at a multiple of more than 14.5 times forward earnings in dollar terms when Mr. Flint took over: That is now just 10.6 times.”

“The bank wants a different leader who can act with more urgency to ensure the bank gets its strategy moving quickly. Some in the bank had grown frustrated with his low-key style, according to people within the lender.”

Mr. Flint, who has worked for the bank for 32 years, had been unhappy for some time,” the Financial Times said. “He had always been mild mannered and understated, but recently he had become taciturn and withdrawn.”

Wall Street Journal

What the hack?
Sen. Ron Wyden, D-Ore., “is pressing Amazon.com for answers on its cloud-computing technology at the heart of the Capital One hack.” In a letter to Amazon CEO Jeff Bezos, Wyden “requested details about the security of Amazon’s cloud service,” specifically about configuration errors in Amazon’s cloud, which the bank blamed for the hack.

“When a major corporation loses data on a hundred million Americans because of a configuration error, attention naturally focuses on that corporation’s cybersecurity practices,” Wyden’s letter said. “However, if several organizations all make similar configuration errors, it is time to ask whether the underlying technology needs to be made safer, and whether the company that makes it shares responsibility for the breaches.”

Financial Times

Change those PINs
In the U.K., meanwhile, Monzo, one of the country’s leading challenger banks, “has advised almost half a million customers to change their personal identification numbers after uncovering a potential security flaw.” The digital bank “said it had incorrectly stored around 480,000 customer PINs where they could be accessed by internal engineers.” However, the bank “confirmed the information hasn’t been used to commit fraud.”

Out of focus
Interest rates on U.S. credit cards have jumped past 17%, their highest levels “in more than a quarter-century,” according to Federal Reserve data. One reason: customers are focused on perks, like cashback and airline miles, not rates.

Majority stake
JPMorgan Chase has purchased a majority stake in its Chinese joint venture, China International Fund Management, “making it the first foreign business to take control of a local JV.”

Follow the leader
UBS, which recently announced it would charge wealthy customers in Switzerland a fee for depositing large amounts of money as a response to negative interest rates, “believes its move — as the largest wealth manager in the world — is likely to spur competitors to do the same.”

Quotable

“I do not see a strong justification for the Federal Reserve to move into this area and crowd out innovation when viable private-sector alternatives are available.” — Federal Reserve Vice Chairman for Supervision Randal Quarles, the lone dissenter in the Fed’s decision to build a high-speed payments network that would compete with one built by large banks.

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