Congress talks Crypto & PayPal Exec Says Federal Reserve System Needs Fundamental Change at hearing


hello folks you have reached the cryptocurrency portal and today I have some interesting information that I personally think is exciting some people may think it’s boring but I personally think it’s exciting we always call for regulations in the crypto space on this channel and I continue to ask for the regulations to come forward through Congress in the United States just so we have some regulatory clarity in this space and I’ve done a couple videos lately and I’ll link them in the comment section below where Congress is kind of moving on some fronts there’s 22 bills or going through Congress I think one has already become law so there’s 21 bills out there now here this is a the House Financial Services Committee held a hearing today and it was more of a task force and first off let me show you who it is the US House Committee on financial services and let’s kind of talk about what they do the full committee and again this is a task force of the full committee the full committee oversees all components of the nation’s housing and financial services sector including banking insurance real estate public and assisted housing in securities the committee continually reviews the laws and programs related to the US Department of Housing and Urban Development the Federal Reserve Bank ding-ding-ding the Federal Deposit Insurance Corporation Fannie Mae and Freddie Mac and international development in finance agencies such as the World Bank and the International Monetary Fund huh IMF the committee also ensures enforcement of Housing and consumer protection laws such as the US Housing Act the Truth in Lending Act the Housing and Community Development Act the Fair Credit Reporting Act the Real Estate Settlement Procedures Act the community and Reinvestment Act and financial privacy laws so this committee the House Committee on financial services obviously has an umbrella to to go over many aspects but in terms of cryptocurrency when we want to focus on of course is the Federal Reserve Bank the World Bank and the International Monetary Fund so it’s very interesting what they have jurisdiction over so real quick we want snow Tainan this just who is on this committee it’s a huge committee so the Democrats are on this side the Republicans are on this side Republicans have more on the committee because they’re in the majority this is actually wrong so it’s not up to date you’ll hear in the video that we that I’m gonna run later that Emmer is the actual ranking member so the highest ranking member of the Republican side and on this side the person that’s running the meeting that you’ll see here today is Stephen Lynch from Massachusetts so the chairwoman is Maxine Waters of the entire committee but for this task force Stephen Lynch he is running this meeting and then Tom Emmer right here from Minnesota who is Pro crypto and he has a few bills out there that he’s trying to move forward and so at the end of this video after we go through some articles I’m gonna run the video of the US House the Financial Services Committee meeting this task force I thought it was interesting so you know if you’re not into this maybe you end up going out going away and cutting away but I encourage you to listen to it because it’s pretty good so if you’re on a long drive somewhere just plate in the background or if you’re doing something the house does have it on the background so it’s pretty cool so I’m Tom Emmer is a great person to listen to and the name of the committee or task force is is cash still king reviewing the rise of mobile payments so let’s go through the article first and then we’re gonna end with the portion of the financial services committee meeting so it says here in the article paypal execs says Federal Reserve System needs fundamental change hung the House Financial Services Committee held a hearing on Thursday to discuss the rise of FEM tech and its impact on cash the committee’s Task Force on financial technology so this is the task force underneath the Full House Financial Services Committee is led by ranking member Tom Emmer and you saw on the website it has the other person who’s ranking member of Tom M or who’s Pro who Pro crypto is the ranking member he focused on how consumers are making payments in the 21st century and how the digital economy can engage under bank customers Rep Emmer who has called upon his fellow lawmakers in the past to make more of a pro crypto stance to improve financial services began highlighting began by highlighting the importance of exploring a digital dollar so this guy really gets in and speaking of the US dollar and digitizing it you probably heard about the digital dollar project that’s come out I’ll also link in the comments section below a link to that video which I did over reviewing the digital dollar project so this guy gets it rep Emmer gets it on crypto I don’t know stances on other issues so don’t take it you know don’t take a stance like oh my god dude you know he did this I’m just talkin bout crypto because that’s what we’re focused on on this channel and his quote here is I also like to acknowledge the former ranking member French Hill for his efforts in this space rep Hill wrote a letter to the Federal Reserve supporting further research into the concept of a digital dollar this concept could both speed up transactions and provide convenience for consumers but it can also extend access to those previously excluded and help bring more people into our increasingly digital world leaders from PayPal the new economy project the Brooking Institute Consumer Reports in the US Faster Payments Council were called to give testimony commenting on the crypto currencies including Bitcoin aetherium AOS XRP Mineiro and z cash as well as customer authentication and digital payments among other topics u s– man ahmed head of the global public policy at paypal says that the banking system is due for a revamp and the quote is i would just note that for the core banking architecture i think there would probably be some changes needed in terms of the Federal Reserve System but for smaller valuation or smaller amount payments I think you already are seen some blockchain based systems that enable the movement of money I think there are examples out there we talked about XRP or other that kind of offer this so they’re highlighting xrp right there amen also says the cryptography aspect of cryptocurrencies is being leveraged to create solutions that reduce the number of actors with access to sensitive financial information but Christina tetr alt senior policy counsel at Consumer Reports argues that the promise of cryptocurrencies has already been lost and she says we have looked at cryptocurrency I made remarks about six or seven years ago that the original promise of cryptocurrency was returning power to consumers and what in fact has happened in the intervening years is what what we’ve seen as an infrastructure built up that’s largely acting as an intermediary that consumers are not truly empowered to be quote their own bank and that these intermediaries are often unregulated unsupervised that there aren’t clear rules of the road and that’s true we need regulatory clarity and so the promise of cryptocurrencies in many ways has been lost I don’t agree with that it’s just new still there there are any number of needs not the least of which is to fold them into payments law any more rational way and a rationalize payments law overall such a folding however hints at efforts to fit innovative technologies into old legal frameworks perhaps overlooking the need to create an entirely new approach to governance Emmer countered tetryl by parsing the definition of rational and distilling how a subjective term can be turned into a basis for establishing facts and providing consumer protections harming innovation that’s true we don’t want to harm innovation because if we harm innovation it just stifles it and will continue the momentum in this space and we need regulatory clarity so we don’t stifle innovation enter an Emmer ends up saying as defined by you or someone else what is rational seriously it’s your definition of what’s rational because there’s a whole environment out there of brilliant genius young people who are coming up with new ways to transfer value every single day and I worry they’re going to crush that entrepreneurial spirit in that advancement here here mr. Emmer so appreciate his thoughts so now what I’m gonna do folks is I’m gonna go ahead and play the house finance Services Committee this subcommittee and task force on this topic again is it’s called is cash king and it’s reviewing the rise of mobile pump it’s incredibly interesting again Stephen Lynch from Massachusetts the Democrat is running the meeting and Tom Emmer is now the ranking member on this committee he’s the one that’s Pro crypto so listen to his thoughts Steve Stephen Lynch goes first and then Tom Emmer follows and then just follow along if this isn’t your thing I get it but I love this stuff because we need regulation in the crypto space and this is on the forefront of what’s happy and in the crypto space so I encourage you to listen to the whole thing do it while you’re doing laundry list it while you’re doing launch or just something else or you’re on a drive or something it’s really intriguing so here we go folks it’s about I’d say it’s about an hour and 40 minutes so here we go members committee not on this task force are authorized to speak practice the objection representative Donald King of New Jersey may also participate in today’s hearing and be recognized by the chair to question witnesses questioning this hearing is entitled his cache still king reviewing the rise of mobile payments I now recognize myself for four minutes to give an opening statements again welcome everyone good morning and thank you for attending this hearing of the task force and thank you for joining us today we’re here to discuss the future of payments in America over the past few years we’ve heard anecdotal but none but growing evidence that retailers and consumers are moving toward a cashless society a society where consumers don’t carry cash and retailers don’t accept it instead using either plastic or mobile forms of payment a truly cashless future is not imminent but the rise of non-cash payments is real in today’s conversation is to help our committee better understand the implications of that rise for Financial Inclusion consumer privacy and costs to both business and consumers new payment methods the theory goes speed up transactions give consumers more control over their money and make operating a business cheaper and safer a consumer can swipe a card or tap their phone instead of making change at the register that transaction is then instantaneously documented with her financial institution automatically adding it to her ledger which tracks spending and available balances and the business gets to avoid the time and expense of accounting or safely storing and moving physical currency however the use of physical cash is still a major part of our retail economy research shows that cash payments make up 42 percent of transactions under $25 and 49 percent of transactions under $10 these transactions disproportionately involved disadvantaged and working-class Americans mm-hmm cashless payments typically require that consumers have access to a bank account to back their payment method despite improvements over the past few years the most recent FDIC survey showed that roughly 14 million adults six and a half percent of America’s households lack bank account access if we don’t solve the problem of banking access before transitioning to a cashless society we’ll be preventing families across the country from accessing many of the basic goods and services they need to survive further high-profile data breaches have been a regular fixture in the news over the past few years this has left consumers rightly concerned about the security of their financial data cash transactions involved no convolving no consumer data being collected while non-cash payments require least some data to be exchanged more than a quarter of all malware attacks in 28 teen were directed at banks and financial organizations as the amount of personally identifiable information stored by financial services firms grossed will continue to see a rise in the attacks on these groups and while our financial institutions continue to combat these attacks some consumers choose to manage their finances in cash a cashless future would not give these Americans that choice we needed to promote innovation and payment technology inclusion and security I hope today’s hearing will focus on the way we can develop our payment system to reflect these needs the ubiquity of mobile payments is on the rise in Europe Asia and our competitors there will also continue to develop their own technology we must learn from their experience and focus on meaning the needs of all our consumers here at home so I look forward to today’s discussion and to hearing from our witnesses with that I now recognize my friend and the new ranking member mr. Ammer for an opening statement of five minutes Thank You mr. chair and thank you for convening this meeting on mobile payments I want to take a moment to acknowledge many of the concerns that some of our witnesses will offer in their testimony and that some of what you just shared there are serious public policy challenges to address and I look forward to working through them with you and everybody on this committee however I may differ in tone today because I’d like to look at the many positive changes and innovations we have in mobile payments we have tremendous innovation occurring in the mobile payment space the term mobile payments is so broad that it even fails to capture all the improvements in ease and convenience of payment as well as the growing methods of payment we can’t be afraid of innovation and change ignoring or even suppressing innovation will not make it go away innovation can actually be a key driver in lowering cost to individuals and creating new ways to enhance consumer protection we have so many ways to pay today using our digital devices this past holiday season Americans spent more than 50 billion dollars just using their phones Apple pay ven Mosel Square cash and even Bitcoin are now household names some some of the most successful mobile payment applications include uber and lyft or I can open my favorite merchant mobile app select items to purchase see what coupons are and wards are available and in one-click pay for my items this hearing is titled is cash still king while we have differing opinions among our witnesses and among Task Force members is this really the right question to ask regardless of the dominant form of payments shouldn’t we be asking how can we make access to commerce easier and more fair how do we ensure financial inclusion in an evolving world how can new forms of payment facilitate access to services and uplift struggling Americans cash is undoubtedly still with us it will remain that way for the foreseeable future but this is the financial technology task force and I hope we spend some time trying to learn about and better understand the changes taking place in our society I hope we discuss ways that mobile payments can include everyone and enable access to capital and financial services in ways that were previously impossible I’d also like to acknowledge the former ranking member French Hill for his efforts in this space representative Hill led a letter to the Federal Reserve supporting further research into the concept of a digital dollar this concept could both speed up transactions and provide convenience for consumers but it can also extend access to those previously excluded and help bring more people into our increasingly digital world in advance I thank the witnesses for their time and insights on these topics and I look forward to the discussion today and I yield back the gentleman yields the chair now recognizes mr. Scott from Georgia from one minute chairman Lynch I look forward to today’s hearing on financial inclusion how we can work with that on how payments innovation can improve access and convenience for underbanked customers also security in our financial system and how an increase in online transactions impact transparency and fraud and also mr. chairman our task force has been critically engaged in the ways of cutting edge technology in the way it’s cutting edge technology can benefit consumers and small businesses I look forward to our distinguished panelists and Thank You mr. chairman the gentleman yields so today we welcome the testimony of a distinguished and accomplished witnesses miss Diana tell real the co-executive director of the new economy project an organization built to support community controlled development and produce safe and healthy communities mr. bliss Mohammad head of global public policy at PayPal a leading company in digital payments technology and owner of the peer-to-peer payments company venmo and I used to continually send money to my daughter in college and Elon University in North Carolina she appreciates your service mr. Aaron Klein fellow in economic studies and policy director for the center of on regulation and markets at the Brookings Institution mr. Klein assault has also served as Deputy Assistant Secretary for economic policy of the Treasury Department and as the chief economist of the Senate Banking Committee miss Christina Tetreault is that right Teatro Teatro Thank You Pedro okay thank you miss Christina Tatro senior policy counsel at Consumer Reports a nonprofit consisting of policy and legal experts that are advocate for pro-consumer policies and financial services and miss Kim for executive director of the US Faster Payments Council and industry trade organization dedicated to modernizing the u.s. payment system thank you all for being here and for helping the committee with its work witnesses are reminded that your oral testimony will be limited to five minutes so without objection your written statements will be made part of the record is still real you are now recognized for five minutes to give an oral presentation of your testimony thank you chairman Lynch and ranking member Emmer and member of the taskforce on financial technology thank you for the invitation to testify at today’s hearing I’m here on behalf of new economy project an economic justice Center in New York City that for more than 25 years has worked with low-income New Yorkers and community-based organizations to challenge systemic discrimination in our financial system and to advance fair lending financial inclusion and reinvestment as a matter of racial justice and to ensure the tools are available for equitable Neighborhood Development I’m pleased to share our perspectives on some of the issues being discussed at today’s hearing focusing on on bank redlining and continued impediments to banking access for too many Americans and people as well as the growth of cashless businesses and disparities in financial services access as they play out in low-income neighborhoods and communities of color I’ve attached to my testimony several maps that just paint a bit of the landscape in New York City and show the vast disparities in terms of where Bank branches even locate based on the racial composition of neighborhoods and you’ll see that on the maps they show that there are fewer than one there’s fewer than one bank branch per 10,000 residents and communities that are predominantly black or Latino and that compares to three and a half branches in predominantly white neighborhoods it’s just one indicator that shows the different kind of financial services landscape that people encounter in their daily lives not only in New York City but throughout the country where those patterns play out consistently I want to emphasize a few things in my verbal testimony one is that the issues addressed in today’s hearing we believe are systemic in nature and deeply entrenched and they call for bold systemic solutions including strong regulation too often discussions about financial access disparities including the use of cash versus credit or debit focus on choices or behaviors of individuals or on the need to design so-called alternative products rather than on addressing the continued structural barriers that block millions of people including poor people immigrants low-wage workers and many others from acts mainstream and strongly regulated institutions products and systems as this committee knows the there are multiple impediments and some of them include the high cost of maintaining bank accounts persistent redlining as I mentioned and prohibitive identification requirements which all create real and true barriers to entry for millions of people through our legal assistance hotline which assists thousands of people every year we have in fact seen a very clear and growing pattern of mainstream banks actually pushing low-income people out of the banking system and out of regulated services and mariette ways one example is the way that banks typically will close people’s accounts if they experience fraud or at the end of a month if they’ve incurred high and hidden overdraft fees and are unable to pay those overdraft fees back which can easily total in the hundreds of dollars not only do banks close people’s accounts in those instances but they report those customers information to check systems and other consumer reporting databases shared by the banks and it effectively blacklist people from opening accounts elsewhere and so the the conversation about access to finance and how that can facilitate mobile payments needs to look at some of the continued predatory practices in our system I want to point out a few things so one is that while we believe that eliminating barriers to access are important at the same time we have to recognize that financial products and technology are not a solution to these deeply systemic problems they aren’t solving poverty or income inequality we see too often that you know there are we hear industry and policy makers tout different products and services as being the solution to deeply entrenched problems that require bolder solutions we also believe that we must challenge the the rhetoric and the sort of alleged benefits around financial innovation and thin tech which in the experience of low-income people and communities that we work with just simply fail to match reality too often for decades companies have invoked innovation as a smokescreen frankly to evade strong regulation and to peddle inferior high-cost or even outright predatory products from subprime lending to payday loans to fee riddled prepaid debit cards and payroll cards that are often marketed to low-wage workers or that employers force workers to receive their payments on essentially transferring the cost of managing payroll from the employer to the low-wage worker and I just want to emphasize that the term FinTech obviously is very broad and is used in many ways it can refer to a range of companies and technologies we recognize that appropriate and safe technology can of course benefit people but too often we see these companies claiming to be eliminating banking deserts and supporting and empowering communities when they are in fact perpetuating segregation in our banking system in our one example is health and tech companies in New York are routinely seeking to circumvent strong state consumer protection laws including our state usury laws which have effectively kept out payday and other exploitative usury is lending from our state the administration’s efforts currently to exempt FinTech companies from critical consumer protection rules only exacerbates these serious risks I thank you so much for your time and I look forward to addressing the other topics during the Q&A Thank You mr. reale mr. al fayed now recognized for five minutes Thank You chairman Lynch ranking member mrjoey waters ranking member McHenry and members of the task force I would like to thank you all for giving PayPal the opportunity to testify today on the important topic of mobile payments since 1998 PayPal has been at the forefront of mobile payments PayPal operates an open secure and technology agnostic digital payments platform that gives our over 300 million active account holders the confidence to connect and transact in new and powerful ways whether they are online in app or in person through a combination of technological innovation and strategic partnerships PayPal creates better ways to manage and move money we offer people and businesses choice and when they send and receive payments whether sending and receiving money with friends and family through apps like PayPal venmo and zoom or engaging ecommerce more and more people are using their smartphones to make purchases receive payments and manage their accounts our technology is giving more people and businesses access to the global market and the ability to use financial services tailored to their specific needs the mobile phone is transformed nearly every aspect of our lives we use it to communicate with friends and family watch our favorite shows order a cab change the temperature at home and engage in payments the growth of smartphones over the past decade has been incredible in 2011 only 35% of Americans had access to a smartphone the percentage grew to 81 percent by 2019 at PayPal we have witnessed how the rise of mobile devices is transformed payments in q4 of 2019 a 44 percent of the 199 billion dollars of total payment volume we process was made on a mobile device the advancement of mobile payments has important implications for unbanked under banked and financially unhealthy individuals and communities for example giving people access to money instantly via a mobile device can help in reducing fees and late payments sending remittances using the mobile device is about half the cost of a traditional remittance and can save over an hour of time for both the sender and the receiver mobile payments can also provide a baseline for credit underwriting which can enable consumer finance during cash flow challenges mobile payments can also benefit small businesses due to the lower costs of acceptance as well as payments data being leveraged to help fill the gap in small business working capital in particular for women and minority-owned businesses security has been front and center throughout the development of mobile payments leading to the adoption of tokenization technology which reduces the number of entities that have access to sensitive financial data PayPal is a pioneer of tokenization technology tokenization subs sensitive financial information with a series of non sensitive numbers that confirm a business that confirm to a business that a payment is authentic but minimizes the likelihood of data breaches and reduces fraud well while payments information is sensitive and PayPal leverages payments data for fraud reduction and service improvement cash is a ubiquitous form of payment while it may appear costless to transfer there are costs associated with cash cash is deeply implicated in tax evasion which costs the US federal government some 500 billion dollars a year in revenue when Mexican drug lord el chapo was arrested there was more than 200 million dollars in cash found on the premises and the global truck drug trade is estimated at 600 billion dollars and finally 20 percent of unbanked consumers report having cash lost or stolen in a study of low-income los angeles-area households the finding was that the average unbanked consumer lost the equivalent of nearly two weeks of household expenses when cash was lost or stolen mobile payments presents a tremendous opportunity to reduce many of these costs associated with cash now while we don’t predict the death of cash in the next decade or two and we believe that consumers should have choice in what payments options they choose at PayPal we are working diligently to make sure that the value proposition of digital payments vastly outsi exceeds the value proposition of cash for every member of society thank you again for the opportunity to address the task force on this important and timely topic and I look forward to answering any questions Thank You mr. Achmed mr. Klein you’re now recognized for five minutes Thank You chair Lynch ranking member Emmer chair watters ranking member mchenry members of the task force for the opportunity to testify on the critically important issue of the future of cash and the rise of digital wallets let me start by answering the question the hearing poses yes cash is still King in fact it cash is used by a diverse set of people who defied traditional political or Geographic injuries false narratives abound that cash is dying our casual societies around the future or the Millennials don’t use cash in fact Millennials and their grandparents have cash in common both generations use it more than those between ages 30 and 60 in a sample of mostly small business transactions Iowa and Wisconsin – the more cash intensive states have a lot more in common with the Bronx and Staten Island while Utah and Virginia two of the more card intensive states are much more similar to Brooklyn and Manhattan nationally racial minorities and rural Americans both use cash more frequently than has been stated cash is the most common way people pay for things under $25 while cash is still king there’s no denying that increasingly large number of goods and services are moving on to digital point payment platforms that do not accept cash as the economy digitizes those without access to low-cost reliable digital payments are increasingly unable to participate and share in the benefits prior concerns about a digital divide were centered around the questions of access smartphones have successfully bridged this divide however online access alone is insufficient without a means to purchase the goods or services being offered the benefits of the app gig or online economy failed to convey access to digital payments has become the new digital divide online and app base goods and services lower costs from everything from ordering groceries to hailing a cab however the economics of many digital services simply assume users will always have funds to cover recurring our periodic expenses and expect the ability to tap into a consumers bank account to get paid even the high cost of overdraft fees growing income volatility our nation’s anachronistically slow payment system the reality for people living paycheck to paycheck is a far more expensive system than for those on the other side of the divide for consumers to truly benefit from the digital economy cheap and reliable digital payments are necessary in our existing system provides them freely to those with money and charges a lot to those without it may require government policy and resources and strong rules to fix this problem a corollary to the policy that businesses continue to accept cash is that consumers have access to digital payments and that needs to be facilitated my written testimony goes into significant detail regarding the high and often hidden costs of existing banking products like overdraft fees that create an effectively different cost structure for people living paycheck to paycheck it highlights multiple policies to solve some of these problems and reduce the demand for expensive ways to access cash like check cashing the key is to require immediate funds availability for consumers which most of the rest of the world developed decades ago through real-time payments waiting for the Federal Reserve to follow through on its announcement to build the system sometime this decade is not enough policymakers could solve this problem today if they wanted to by regulation or legislation in fact tomorrow is the 31st a lot of people will get paid that day and will struggle to come up with the amount of money available in their bank account to meet their payments on the 1st of the month the next day I want to conclude by noting that America once led the world in payment technology 50 years ago America pioneered the new payment technology that would come to dominate the world magnetic stripe plastic cards but technology alone was not enough it required robust consumer protection legislation from Congress such as the Electronic Funds Transfer Act to successfully create an environment where cards flourished today China has leapfrogged cards China’s new system is built on digital wallets QR codes and runs through their own big tech firms China’s system largely disintermediate banks and creates an alternative payment ecosystem with different incentives between merchants consumers and payment system providers it challenges the long-standing placement of payments on the side of banking as opposed to Commerce China’s system is unlikely to catch on in America precisely because it is more efficient because it does not take large sums of money from merchants at the register it will not be able to compete with the growing high-end credit cards that come to line America’s wealthy with thousands of tax-free dollars in rewards ironically the inefficiency in America’s payment system that is turned it into a reverse Robin Hood entry that contributes income inequality will block the adoption of alternative technology this committee is wise to consider the rise of mobile wallets and policy makers should devote more time and attention and resources to figure out how to create a more fair efficient and inclusive payment system I think the chair and ranking member and rested the taskforce and look forward to your questions Thank You mr. Klein mr. Tatro you now recognized for five minutes carolyn waters remember McHenry chairman Lynch ranking member Emmer and members of the financial technology taskforce thank you for the opportunity to be here today I am Christina Tatro senior policy counsel for Consumer Reports CR is an expert independent nonprofit organization whose mission is to work for a fair safe and just marketplace for all my CR colleague Suzanne Martindale testified before this committee in 2012 regarding the future of money and the rise of mobile payments she noted that consumer privacy and concerns consumer privacy concerns inhibited mobile payments adoption and that fragmentation in payments law creates uncertainty for consumers eight years later I will make these same points today American adoption of mobile payments continues to lag that of other countries Americans still love cash and as compared to mobile they love cards it’s important to note that mobile is a platform and not a new payments type beneath the modern veneer of mobile payments is mostly technology built in the early 1970s new payments rails including faster payments and cryptocurrency are in the case of faster payments or should be in the case of cryptocurrency covered by existing laws unfortunately payments law is an irrational mess under current law credit card holders have the strongest protections debit card bank transfer and prepaid accounts have weaker protections gift cards and direct to carrier billing have almost none Congress can fix the mess in payments law making every way safe to pay it can do this by establishing a strong floor of uniform protections for all non non check payments now when it comes to mobile payments unfortunately who not consumers do not understand their rights and obligations when we ask a focus group of mobile payments users what they thought would happen if something went wrong with the payment they uniformly said that they expected that the company whose name was on the app or wallet which fixed the problem and make them whole this is not necessarily the case in some instances users may in fact be obligated to contact their bank or card issuer for help other problems fall outside the scope of current law for example when a consumer is tricked into sending money to a scammer they will find that these transactions have essentially the same level of protection as cash now many claims have been made about how mobile will increase Financial Inclusion the reality is quite different Americans without checking and savings accounts are less likely than bank consumers to use mobile payments and are far more cash reliant than other Americans unbanked consumers are more likely to suspend or cancel their cell service because of the cost of maintaining coverage making regular use of mobile financial services nearly impossible no app fixes the structural issues that lock out too many Americans cryptocurrency has also been proposed as a fix for financial inclusion if the legal mess and traditional payments is bad the legal mess and cryptocurrency is worse the few consumer protections that cryptocurrency payments have are largely found in state money transmitter laws and are seriously lacking cryptocurrency and for that matter any emerging financial service should not be tested on consumers with the least cushion in their financial lives the best way to ensure consumer access to faster and safer electronic payments is to support the Federal Reserve’s proposal to build the Fed now faster payment system and not by empowering untested unregulated corporate schemes such as Facebook’s Libre there is another shadow over mobile payments the current protections for mobile payments made with stored-value for example the money held in Van moe accounts are threatened by the PayPal lawsuit seeking to invalidate the CFPB’s prepaid rule before the rule consumers had to rely on the inadequate protections provided by state my transmitter laws billions of dollars and millions of consumer accounts are at risk if this rule is invalidated privacy concerns exist alongside legal concerns and mobile payments so well mobile payments and even some additional financial services are free to consumers users are not the customers of these services they are in fact the product the potential for users information be weaponized against them is particularly acute when payments are combined with platforms we also we need strong privacy legislation that creates a federal flora protections a law that requires data minimization clear information about provider practices and strong data security standards this law must also have vigorous enforcement tools and tools to ensure accountability I thank you for the opportunity to be here today and I look forward to your questions Thank You mr. Tatro miss Ford you now recognized for five minutes good morning chairman Lynch ranking member Emmer and distinguished members of the task force thank you for the invitation to be here today my name is kim ford and i am executive director of the u.s. Faster Payments Council the FPC is a membership organization that is leading the industry effort to modernize the u.s. payment system we were formed from the work of the Federal Reserve’s faster payments task force which brought the industry together to start to figure out how to make the u.s. payment system faster more secure and more efficient I’m grateful for the opportunity to be with you today as we examine consumers payment preferences and look to what the future may hold for the u.s. payment system as a result as you know the payments landscape is in the midst of unprecedented change when I entered this industry in 2004 the headline at that time was that cheques were just starting to lose ground to debit and credit cards and now we’re talking about things like mobile payments biometrics machine learning artificial intelligence cryptocurrency and more clearly we have transitioned in this country from an environment dominated by paper checks and cash so one dominated by electronic payments and we are seeing that cash is being used less and less for some of the major payment categories at once led for example historically cash has been used for low value payments below $25 but we are seeing card use grow in this area as well and as think about why that is two themes come across most clearly consumers desire for convenience and consumers desire for security take electronic payment cards they’re accepted at retailers across the globe they enable they enable convenient tracking of transactions provide budgeting options and provide consumers with protections against loss and fraud and while cash may also be convenient easy to carry and widely accepted it can be easily lost or stolen and there are no measures in place for consumers to recoup such funds for these reasons among others electronic payments have climbed the ranks to become a preferred payment option for US consumers moreover as Americans incorporate their smartphones into so many aspects of their lives they also expect that on-demand functionality to extend to how they transact with their friends family businesses employers and even the government this is translated to an increase in the use of smartphones for things like internet banking ecommerce transactions and the use of mobile payment apps one study by payment provider tesis reported that over the last three years of their consumer payment research survey respondents consistently rated the most attractive features of mobile payments as one the ability to immediately stop a fraudulent transaction 2 the ability to instantly view their transactions and 3 the ability to use their phone to turn their payment card on or off to prevent unauthorized usage these findings underscores so many Americans increasing reliance on electronic payments to solve for convenience and added security but of course the popularity of mobile phones and access to the Internet are not enough to increase Financial Inclusion and certainly it is appropriate to ensure that people can actually benefit from digital financial services and this of course requires a well-developed payment system reliable and active accessible infrastructure and a robust regulatory framework with consumer protection safeguards and while we haven’t completely solved the access issue in the US Financial Inclusion is getting better due in part to new types of financial services that are accessed through mobile phones in the internet but challenging our system to be better isn’t limited to plastic cards and mobile phones at the FPC we believe that the next evolution of our payment system is a more real-time safe and efficient system that anyone can access at anytime anyhow and anywhere we believe that faster payments have the potential to build on the benefits of current electronic payment mechanisms and further improve money management remove costly paper processes minimize settlement risk and encourage global competitiveness our members believe it so much that they created an organization to bring all the payment industry stakeholder segments together to identify barriers to faster payments adoption and then work shoulder-to-shoulder to solve those problems for example for example we are examining the regulatory landscape for faster payments stunning fraud best practices and trends promoting transparency for consumer and business end users assessing directory models and helping our members understand how to develop and implement a faster payment strategy yes we support electronic payments but we also support an environment in which payment choice is preserved whether that be paying with cash writing a check sending a wire ACH or using a credit debit or prepaid card I’m also proud of the fact that we are demonstrating that it is possible to get a widely diverse group of industry stakeholders together representing consumer groups merchants tech providers financial institutions and more to tackle complex problems and a fair inclusive and transparent manner with an end goal on which we all agree which is driving universal access to a faster payment system that delivers a high-quality and secure user experience for all thank you for the opportunity to present to you and I look forward to answering your questions thank you miss Ford I now yield myself five minutes for questions mr. Kline you you you illustrate a good point where if you look at young people and their consumer preferences you know my are two girls I don’t think have ever been in a bank except for maybe getting traveler’s checks or something like that probably you know less than five times in their lifetime you know compared to how I grew up where pay day you’d go down there and stand in line with everybody else so so this is a trend that is is is really overtaking us and so and it’s being driven by consumer preference it’s not some I don’t think it’s necessarily some cabal you know diabolical plan I think it’s it’s just easier and people want to do it the problem is that not everybody has that opportunity you’ve you’ve had an interesting you know background in terms of looking at International payment systems and things like that there are there models out there that would would sort of address what we’re trying to get at we know this is it’s much cheaper and in many ways more efficient and safer in some instances are there systems out there that do a better job than we we have right now in terms of you know the payment systems that are out there yeah chairman Lee it pains me to say this but China’s system is much more efficient much faster and has reached a level of universal adoption that is somewhat mind-boggling I mean you have two services that started less than five years ago and they each of a billion monthly users you know and they were able to do it in part one of the fascinating things about the Chinese experiences this is a country that had by some estimates 7 million debit cards but only 20 million to 40 million card readers you could not take a car go around China and try and do something with your magnetic stripe card and they look at you like you’re from a century ago it’s all on codes and digital wallets now their problems with the Chinese system I’m not advocating that we move there particularly because of some of the commercial concerns involved in bringing the banking system the payment system outside of banking and our legal and regulatory framework completely assumes that payments are part of banking system as ms teatros testimony points out everything is tied to this being in banking when you legally look at the the cleft between banking and commerce in the United States there’s nothing that ties payments on to the banking side yeah thank you and mr. April I want to ask you alright we raised the China model so so right now if if banking goes the way of the internet where they just collect all our information and not only what they need to but everything they can get their hands on and and then they you know screen scraping and selling personal data personal financial data I know that you you’ve written extensively on privacy do we need a new architecture you know with respect to financial data then we’ve we’ve given it away in terms of you know our personal data on the information side on the internet side do we need a new architecture to be more covetous and protective of our financial data or can we can we overlay this on on the existing system I think there are two solutions to the problem the first is provider practices so enabling tools for consumers to be able to really see what information is being collected and then make choices and there are efforts out there financial data exchange I know they were here before the committee previously and they’re creating those tools and those tools are very helpful and we’re supportive of that effort the other aspect though is a strong federal privacy floor so that actually includes curbs on data collection and sharing and GLBA is often touted as a privacy law but it is not in fact privacy protected in those ways and so it’s time for a new new new approach great Thank You mr. Achmed speaking for venmo and for the industry in terms of what you have come up with other are there mechanisms or models that that you identify that might address the concerns that we’ve raised here certainly I know something mr. Klein raised about merchant acceptance so in China a lot of the reason why there’s been success there and moving to mobile payments was getting all of the businesses to accept these small QR codes and agree with mr. Klein that maybe it’s that model maybe it’s something else but I just want to stress that when we’re talking about consumer adoption low and moderate income consumers rural consumers if the places where they go don’t accept mobile payments then they won’t switch it’s a chicken and egg problem and we also have to include a focus on the merchant side of the equation that’s great thank you very much my time has expired I now recognize the gentleman from Minnesota our ranking member mr. Ammer for five minutes Thank You mr. chair and thank you to the committee for your testimony being here today it’s interesting more than one of you this morning was critical in different respects to the promise that the innovation new technologies provides in fact I think one of you even referred to the rhetoric that gets used about how this is going to benefit consumers and society and I I could focus on several but in the short time Ms Tetro i think that’s the way you say it I was particularly concerned by some provisions your written testimony that you’ve submitted that criticized cryptocurrency although you only mention Libre which is not in itself a cryptocurrency I would hope that you more fully explored the these innovations or if you haven’t that you will be that and the opportunities that they provide to both build a financial future for individuals but also to empower individuals to control the value of their own assets separate from government control have you done any of that so we have looked at cryptocurrency and I made remarks almost what six or seven years ago that I’m the original promise of cryptocurrency was returning power to consumers and what in fact has happened in the intervening years is that what we’ve seen is an infrastructure that’s built up that’s largely acting as an intermediary that consumers are not truly empowered to quote unquote be their own bank and so well I’m and and that these intermediaries are often under regulated under supervise that there aren’t clear rules of the road and so the promise of cryptocurrency in many ways has been lost and so the need there are any number of needs not the least of which is to fold them into Amos lonna in a more rational way and to rationalize payments law overall alright well and as defined by you or someone else what is rational I’m like seriously it’s your definition of what’s rational because there’s a whole environment out there are brilliant genius young people who are coming up with new ways to transfer value every single day and I worry that we’re gonna we’re gonna crush that that entrepreneurial spirit and that advancement obviously you and I we’ve heard bitcoin we’ve heard of aetherium you familiar with XRP and the efforts of ripple with technology for their payments yes and you’re familiar with us what about privacy coins like Manero or Z cash if I understood a Matt this hearing that it was that I was not gonna approach the privacy concerns there are any number of different privacy technologies around crypto currencies some are concerning some are very promising and that it really is very item specific so I don’t have a lot to say on that only that you’re right there is definitely I mean I agree with you that there is definitely some interesting things going on I mean how about 0 X or Elgar and I what about stellar which is facilitating cross-border transfers are you familiar with that one no so I mean I could keep going through these but it’s it’s amazing things that are happening out there and it concerns me when we’re talking about mobile payment systems and and we draw in any one of you cryptocurrency or these new innovations which and suggest that it’s it’s a negative because I by the way major companies like IBM are doing work on this to the plastic bank is a pilot program that has proven to be successful in Haiti where did where a digital asset is provided in return for cleaning up plastic waste there are amazing things are you familiar with em Payson yes all right I mean we should talk is somebody used the term rhetoric M stands for mobile pacer is Swahili for money this is a mobile phone-based money transfer financing and micro financing service launched in 2007 by Vodafone the largest mobile mobile network operator in Kenya and Tanzania by 2012 it had 17 million accounts this say this system has been service has been credited with giving millions of people access to formal the formal financial system and for reducing crime in otherwise and otherwise largely based cash based society I again I think we we have to take a deeper look at this and learn more about these innovations it’s not black and white and the real interesting developments come when you start to get into the details and differences in the technology so I’d appreciate it as we talk about mobile payments and move forward if we could be more inclusive about the technologies instead of fearing something that we don’t know enough about thank you the gentleman yields a chair now recognizes the gentleman from Georgia mr. Scott for five minutes thank you very much chairman ladies and gentlemen first let me say that each of your testimonies were very very informative and open our eyes I’m sure too much of what we were only dimly aware however this whole issue is sort of bringing us into the new frontier for our entire financial services industry is very important I’ve been spending quite a bit of my time dealing with an issue that I want to present to this committee which is are we doing enough to make sure we address this fundamental problem according to the more most recent statistics there are 58 million unbanked and underbanked folks out there well what is most startling most of those are unbanked meaning they don’t have a savings account not more my daddy says nobody in the household has a savings account or checking so mr. man let me start with you how do we dress this to make sure that we are providing the transparency to affordability the convenience for these consumers but access to electronic payment systems have traditionally required a savings account or a checking account which which presents challenges here how are you all at PayPal which has certainly been a forerunner and all of this addressing this issue to make sure we bring everybody along with us as we make this technology jump thank you for the question so I think it has to be done in partnership so PayPal is a technology company but there are all sorts of entities that are on the ground in the communities within the places where you’re talking about think of retailers maybe a 7-eleven the Walmart think of a remittance provider like Korea where we can partner with those entities enable cash to be offered up at the point of sale and then digitize it on the back end so I think it’s really in getting on the ground in the communities and the places where these people are and providing them a service as I mentioned in my testimony that is actually more valuable than just a cash based service because until and unless we create that value proposition that really can respond to the challenges and the issues that they’re facing then there won’t be a reason to move into this ecosystem are you confident confident that we will not leave these unbanked and underbanked folks behind I would say at PayPal we’re making very very strong efforts to do that and I think it’s it’s going to be about everyone in this room working together public/private partnership and intentionality behind the efforts in order to prevent that from happening do you think there are costs associated with accepting cash for small businesses certainly and you know I think a typical small business when they’re accepting cash they assume that it’s a cost less transaction but actually when it comes to things like you know simple things like accounting for that cash doing payouts to employees doing payouts to vendors providing security for the cash there are actually a number of costs associated with that my mom was a small business owner remember that the challenges of kind of count for everything and so digital kind of transactions can really help to to simplify a lot of those processes and reduce some of those transactions miss Ford you’ve been working very much in this area throughout your career what are your thoughts on this I mean I think that we have to recognize that obviously there are limitations that financial institutions have because they there are regular there is a regulatory framework in which they have to operate but I think when we look at the experience in the US as well as globally I think that is one reason we’ve seen the rise of non-bank fintechs who are saying okay we’ve got this great technology out there we want to try to be some sort of link to consumers so if we can be that intermediary and try to you know get somebody who is unbanked to be more comfortable you know maybe it starts with a gift card or some sort of a you know some some sort of prepaid card they can load with cash but then that gets them slowly into the financial services system and then become can become banked you know that’s obviously where we want to move things so I think that you know we’re making progress but I agree with you I mean I you know the unbanked issue is very real it’s one reason at the FPC we have a whole consumer segment who are constantly saying you know how how are we going to make this as inclusive as possible but I do think we have to acknowledge that financial institutions are constrained by certain regulations as well thank you very much thank you chairman gentleman yields the chair now recognize the gentleman from Missouri mr. Luetkemeyer minutes limas chairman mr. Klein you made my day today when you said while ago that the seniors and the Millennials have something in common with regard to cash everything and come equipped with Millennials thank you one of the also one of the attributes some of the benefits I guess of being a little older I’ve been through the mill here a little bit is the fact I remember when credit cards came out yes on that old Moses and I we came down the mountain together and I remember then everybody said well it’s end of checks no more checks credit cards gonna take over cheques are gone but as today the letters Fed Reserve Board from st. Louis Federal Reserve Bank st. Louis says we’ve actually got twice as much education system that was that 10 years ago they still have as many cheques issued today as we did 40 years ago one of the credit cards for 50 years don’t tricks can credit cards came out and now we have all different sorts of payment systems out there if I was a new running a new business today I would have all of these kinds of payments because it enhances ability of myself to be a new business to transact business to attract everybody in enable them to make the transaction so when people get exercised here about this is going to happen that’s going to happen here I take a deep breath step back this is just an alternative another way of doing this and so I come from this from the point of view of ok how can do this in a safe fashion I think miss Ford made some really good closing comments in her in her in her testimony there to go I think miss Tetro made some comments with regards to it’s a Libra in cryptocurrencies and you know that quite frankly is now the preferred way of money laundering with crypto currencies for all of our nefarious folks out there so to me I look at the security of the data now you can improve the convenience for people and now you can minimize the use of enabling people to do fraud and launder money so to me this is where we need to be focusing to enhance stability of the mobile phones and and the different types of payment transactions so miss Ford I like the elaborate just a little bit on your your final comments about how we can make a faster system at a safer system and more be more inclusive absolutely so I think you know again one of the elements that is driving this whole conversation around Faster Payments besides the fact that a lot of other countries have implemented faster payment systems is that we have better technology out there and I think you know as we look to for instance the experience in the card space as it relates to security you know we’ve seen some great innovations around encryption and tokenization where the idea is that I think the mindset used to be you know how do we protect our sensitive information from from you know being subject to unauthorized usage now I think you know that we know how sophisticated the criminals are so the conversation has shifted to how do we devalue the data because it’s likely that there’s going to be some sort of a breach somewhere right so I think those are the kinds of things that we’re looking at in the context of faster payments as well which is how can we continue to leverage these types of innovations and for instance if you look at you know fraud prevention practices historically in payments a lot of that was very manual processes individuals actually sitting in front of a monitor trying to you know look at these transactions and now we can think about okay how can we leverage artificial intelligence for instance or machine learning obviously there can be biases in those as well but you know I think there are some opportunities to be able to leverage this technology to add security components thank you for that I missed Del Rio you talked a little bit about some of the concerns that folks who can’t work with a bank because of the costs that are involved there and they have to go to a strictly cash way of living if you found that because the banks charge for cashing checks are for having an account for a minimum amount that you have to have been there for you get free checking is that is that the kind of problems that you see those are some examples and just to clarify not only are people being pushed out of the banking system and being forced to rely on cash but then in the vacuum that banks leave in these neighborhoods where you see the pawnshops rent owned what do you think that what do you think that the banks are having to charge those fees well I think that the banks have made pretty clear well first of all there’s been a wave of deregulation of the banks and there’s a weakening of the Consumer Financial Protection Bureau and other rules that govern banks we think that makes it pretty clear they’re not very interested in serving low-income people we see that in myriad ways and yes the minimum balances that banks require in order to avoid fees or is one impediment identification requirements that actually go far beyond what regulations require are another impediment for millions have you talked to any banks and asking what it cost to maintain account absolutely and I’m actually the board chair of a community-based credit union and so we’re very aware of the costs of implementing difficult to give a service for free unless unless you can find another way to subsidize that within your institution right I think that one of the problems is that in terms of checking accounts its low-income people through overdraft fees that are subsidizing the free checking of more affluent people and so yes we believe that there are a cost and there’s ways to manage the cost but right now those costs are not being borne fairly among banks customers and you can look at who pays overdraft fees it’s a very small percentage of people and it’s the lower income segments those are loans by the way I thank you very much the gentleman yields the chair now recognizes the gentleman from Iowa mr. axe need five minutes Thank You chairman thank you to the witnesses for being here today really appreciate it obviously we’re hearing a lot of discussion about the benefits that mobile payments can provide as the co-owner with my husband of a digital design firm who uses PayPal literally every day nationally and internationally for payments I’m certainly familiar with the benefits and I think there’s absolutely so much opportunity to help people with better services and and I need hopefully we’ll see more of that down the road however I’m concerned that we’re leaving some people behind we’ve been talking about it today with smartphone and internet access people can’t use these wonderful services as we well know and the FCC estimates that approximately 20 million Americans lack broadband service and I certainly know that in the state of Iowa also due to the issues with mapping we know that that number is probably far greater than just 20 million in fact Microsoft estimated that a hundred and fifty million Americans aren’t actually using the at broadband speeds which they would need to be able to perform these functions and a lot of these people are unfortunately in my district that kind of difficulty is why Iowa is one of the top five states as mr. Kline pointed out in terms of use of cash so mr. Kline I’m worried that moving too quickly to mobile payments will risk exacerbating what we’re already seeing with rural communities absolutely being left behind I’m trying to fight to keep them getting the opportunities that we need are you seeing that moving to mobile too quickly and risking the opportunities for rural communities is something that your research shows to be a problem yes congresswoman it’s very important to appreciate that as the economy digitizes their huge benefits and those benefits then are not accessible to people without the ability to transact in that I think a lot of the conversation about preference for cash that we’ve seen if you dig into the data what you really see is a rise in online purchases particularly for that age category between thirty and sixty now whether that’s consumer preference or choice or whether that’s just the changing nature of our economy because you can get these goods better cheaper faster to be debated what does that mean for people that don’t have the ability either to access that material online and have the ability to make a payment online in a in a convenient and low-cost fashion if you risk an overdraft to buy something that’s five dollars cheaper online it may end up costing you $30 more and part of the problem why there’s so many overdrafts is I don’t know when my paycheck is cleared if I get paid tomorrow on the 31st of the month ten percent of Americans get paid monthly thirty eight percent get paid bi-weekly a lot of people get paid tomorrow do not mistake direct deposit for immediate deposit you are not certain if your payment is going to be available for your funds the very next day and this makes life incredibly challenging for people in rural America and for people who are living paycheck to paycheck the sad reality is we have the tools to fix that ten fifteen twenty years ago United Kingdom went to real-time payments in 2008 Mexico in 2004 and so I think for you know for your constituents in rural America you’re facing a double whammy you have this access problem and you have a means of payment problem and particularly for those living paycheck-to-paycheck and older people for example maybe relying on social security it becomes incredibly challenging for consumers to be empowered enough to be able to solve these problems and access all of these online benefits but thank you for that I appreciate that and as the state who has the fourth oldest population in the country I appreciate your concern for them being able to get their social security that they need moving on mr. Ahmed you mentioned in your opening statement that PayPal is committed to serving every American or something to that regard so bringing broadband access to all Iowans is is a major priority for me as a matter of fact I’m on the Whip’s rural broadband task force we want to make this happen and I think it needs to be really a priority for all of the American economy or we will leave parts of this country behind so I want to ask you specifically since you work for PayPal and really asking all of the mobile payment community to get behind this priority so that everyone can actually benefit from what you have to offer as a recipient of your product that I know works well we need everybody to have access to this my small business owners in Iowa need to be able to utilize services like yours are there steps you’re able to take to help us spread the access more quickly than we’re doing right now well I think we can be supportive of course of your efforts and I think we can also add in kind of you know our perspective on the benefits that access provides in terms of increased growth and increased payments and I would also point out that you know you highlight access is such a key issue but it’s also cost and kind of driving down the cost for individuals in particular in rural areas and making sure that you know the data is not so expensive that yes you have access but you can’t actually use it and so I think we can be supportive of your efforts and and and would love to kind of part then figure out how we can be helpful well we will be in contact because we need your help I yield back thank you the gentlelady yields chair now recognizes the ranking member emeritus of this committee the gentleman from Arkansas mr. Hill is now recognized for five minutes Thank You chairman Lynch great to be with you great to have a payments Broad payments hearing today thank you for making those arrangements got a great discussion I’ve enjoyed hearing everybody’s presentation mr. Meade I was interested in your testimony 40 million users and 28% of PayPal’s total volume as venmo I take it from looking at your and not to like my friend from Massachusetts I have been regular venmo user in my family my question for you is of those 40 million people how many of those users have an account balance with venmo or PayPal meaning there’s cash left in their name out on the system would you guess I don’t happier than that exact number and what the average balance is because of course everybody knows those are not FDIC insured deposits and it reminds me of the old American Express traveler’s checks you know of the 60s where you you have this money that PayPal gets to use but people may or may not know they have it so if you follow up with me on how to appreciate it also I was pleased to read about your being involved in the faster ID Alliance and I assume miss Ford you’re also involved in the faster ID Alliance yeah I think that’s important because in this FinTech task force we’ve talked about these foundational building blocks of a digital future so authentication is fundamental to get away from name and password and so if you could send me some follow-up information on on that who who the members are and what’s what’s being done there that would be of interest I want to turn to tokenization and you reference that and also ask Miss Ford first on that the excuse me banks and non-banks have a payment rail out there in the payment system we have wire transfers we have ACH we have swift we have cash obviously we have a MasterCard direct we have all these different methodologies and my question is can we have a approved regulatory payment rail that’s blockchain based that’s available to banks and non-banks equally where someone could propose a blockchain effort and that what regular what does that look like from a regulatory on of you that rail so it’s not a debit rail it’s not a credit rail it’s a blockchain available digital well whether there’s a cryptocurrency involved or not be neutral on that I’m not sure how how authorized I am to speak on that issue I’m not an expert on on that type of technology but I would say that I don’t think it would be a limitation of technology being you know able to support that rail I think it would actually come down to whatever policy implications there are and I think Christina has alluded to some of this as well that I think you know there there is an inconsistency in the way that you know blockchain or just distributed ledger is regulated today it seems to be happening mainly at the state level and so that kind of inconsistency with the regulatory environment might be one of the limitations that could mr. mayor do you want to comment on that I would just note that you know for the kind of core banking architecture I think there would probably be some changes needed in terms of federal reserve system but for you know smaller valuation or smaller amount payments I think you already are seeing some watching based systems being created that enable the movement of money so I think there are examples out there we talked about experts RP or others that they kind of offer this mr. Klein I’m a forty years in and out of the banking business small banks and larger ones and I couldn’t agree more with your testimony about access to available funds and the timeliness of that we thought we were going to get there in 2004 obviously and this is a huge frustration to people and it leads to you know hire overdraft usage because of that two or three day gap I think we do have a financial literacy issue there too and dr. Foster and I’ve worked a lot on that I mean I think people don’t know they can schedule their payments around their pay day by just simply calling the 1-800 number and doing it and so they’re juggling when they could move everything given that but what should the Fed do about making you suggested five up to $5,000 be available if it’s I get complaints about this from my constituents so under the expedited funds availability act that’s what requires the first hundred dollars as you well know that we made available immediately the Federal Reserve has all the legal authority to change that and change that number and and to change the amount of time up to five thousand dollars for customers of more than six months thank you for that we’ll talk more about that you back mister gentleman yields back the chair now recognizes the gentleman from Ohio mr. Davidson for five minutes I think the chairman and I think our guests thanks for your expertise in this field safe to say we don’t all agree on all the issues here but I am encouraged by the shared consensus that privacy is such a foundational principle for sound payment systems data breaches and data arbitrage pose inherent and underappreciated risk to consumers and we do need a new architecture to protect personally identifiable information and Congress needs to set clear parameters on what data can be collected or transferred we also need to preserve what has worked so well for so long with the US dollar cache is an incredibly important tool and the features of it are alluded to by mr. French Hill when he was talking about a system that could work for banks and for individuals the US dollar if I exchange it I don’t have to go to a bank I don’t have I can transfer it between any one person it’s recognized as legal tender throughout the United States and and I don’t necessarily have to share all kinds of personal identifying information when I get it some people hate that but the reality is when you go to a bank our system of laws requires the bank to know all sorts of things and frankly to spy on all their customers in order to continue to be permitted to operate and they do that largely to keep us safe and to protect us from crimes and things like that but there is this system of cash that’s still permissible for peer-to-peer so as we talked about blockchain you know I don’t think you know everyone would agree in terms of where we’re at with with blockchain or crypto based assets but I think it’s largely a matter of whether it’s understood or rightly understood in my opinion because these are fear that there’s all this abuse there’s been some fraud in the crypto space and rather the solution isn’t to just avoid that space altogether it’s the exact opposite is to provide regulatory certainty and legislative clarity that does not exist currently blockchain broadly protects pro-c identifiable information and done correctly it eliminates or can’t eliminate intermediaries true distributed lech ledger technology so how could we do this it’s not a partisan issue as I said I’ve got co-sponsors for legislation that include people who support Bernie Sanders and co-sponsors who support Donald Trump co-sponsors from the north south east and west Republicans and Democrats the real issue is whether we will confront the innovators dilemma well we continue of the broken status quo that protects incumbents at all costs or we’ll be late will we embrace innovation that will inherently disrupt the current system when confronted with this opportunity in the 1990s Congress got it right in the Internet flourished Congress did not try to understand everything about the architecture of the Internet and clearly anytime there’s a hearing about the topic Congress still does not everything and understand everything about the Internet in fact no one has yet envisioned all the use cases for the internet or Internet technology so how does all this relate to payments innovator payments payment systems are flourishing but unfortunately they’re often launching projects outside of the United States not to avoid our regulations but to find legislative clarity in places like Switzerland or Singapore so will we unleash the power of our innovative economy will we provide legislative certainty where it is absent with bills like the bipartisan token taxonomy Act well we finally addressed the foundational problem of privacy and finally will we allow all Americans to interact freely and privately without intermediaries that collect monetize and often compromised our data they slow the payment system charge fees and do make banking less accessible to some people so I thank you for talking about this and mr. Ahmed perhaps is the bridge between the old economy and the new economy what are your thoughts on the framework that I’ve laid out here certainly understand the framework and understand the need for anonymity and I think it’s the cryptography aspect of crypto currencies or you know payments solutions that leverage the blockchain that really enables that and I think you see that in varying degrees you know as I mentioned the tokenization technology reducing the amount of actors that have access to sensitive financial information so I think it’s certainly something that people demand I think it’s it’s certainly something that there’s technological fixes for but as you also acknowledge there are kind of real concerns from a government perspective about there is financing or money laundering and figuring out a balance between those two and resolve those I think is the key question yeah good point and I think I’m encouraged by you know things like the technology that on a distributed ledger that lets you follow it so you do have privacy but you don’t truly have secrecy I mean you have a much more transparent system with a with a distributed ledger then you have with cash and so far I haven’t heard calls to eliminate cash thankfully my time has expired thank you the gentleman yields back the chair now recognizes the general from Ohio mr. Gonzalez for five minutes Thank You mr. chairman and thank you for our panel today I too even thoroughly enjoyed this discussion we kind of have a lot of different perspectives and opinions on this which I think reflects frankly as some of the challenges that we have legislatively it’s it’s always seemed to me that with respect to FinTech we’re not quite sure where we want to go we think we kind of have a destination in mind but how we get there is always different is Del Rio I want to start with you I just want to kind of try to summarize part of your testimony and just give me a yes or no as to whether you think I kind of got it saw a lot of claims that that seemed to be that FinTech is is primarily or more about jargon that ultimately is exclusionary in its application as opposed to providing real innovation that expands access is that fair characterization sort of okay can you clean it up for me yeah so again it’s not to malign innovation or technology they’re not intrinsically bad or good and that’s the point I think that but my point is that I there’s been a lot of sort of you know rheya fiying of technology is the solution and so it’s gonna solve the problem the unbanked and solve you know inequality and all of these deeply entrenched problems that we’ve talked about today and that your committee is well aware of and so I think that my point was to sort of you know this is the committee on FinTech is to underscore that our experience and those of other advocates community groups financial institutions as well that work with low-income people with immigrants from these with these marginalised communities don’t experience these benefits of FinTech yet and in fact it’s often the reverse where they promise that this is a stepping stone to greater access and to a greater opportunity when it’s not is reinforcing this education so then I want to turn to mr. Ahmed can you talk specifically about the work that you all have been able to do by being in the digital payment space specifically with respect to expanding access to affordable credit for small businesses minority businesses I hear about this from folks in my district frankly and that they love products like yours because now they have the ability to access credit in a way that they all otherwise wouldn’t have certainly thank you for the opportunity so we have a product called PayPal working capital and it leverages the merchant payments data that we hear we partner with the bank and then for a loan and what we find is that 70% of these loans are going to the counties that lost ten or more banks as Miss Del Rio mentioned since the financial crisis so kind of going and filling in that gap we found that 32% of these loans go to women-owned businesses whereas in traditional financial institutions it’s 16% and actually in the u.s. statistics women-owned businesses are 32% of the economy so it’s the ability to offer that loan to the individual that needs it anywhere in the country very very quickly in a secure manner and in a convenient manner that I think is really the distinctive part of the product and of course it’s because you have access to that proprietary data for those businesses right you can see dollars coming in and out and that allows you to price credit more effectively absolutely great and so in your experience any way or at least with that product the innovation has been looking at has been expanding opportunity which completely mirrors the feedback that I get and I’m sensitive to the comments of Miss Dorie I think it’s absolutely legitimate that you know we need to as we’re thinking through the regulatory environment making sure that access is an central component of what we’re doing right but but I do think if if we’re in a world where we’re gonna try to stop all innovation in advance because of a fear of something that may or may not happen I think that’s a dangerous place to be and then with respect to you also mention mr. Medin 50 seconds ma ml BSA compliance as we transition or essentially hopefully transition to more of a blockchain system and that’s one concern that everybody raises can you just provide your perspective on that how do you is that a tech challenge is that a regulatory challenge how can how can we be comfortable I think you know as we heard there our technological solutions to be able to track you know transactions even on even with cryptography depending on the type of cryptography and it’s quite quite a prism and quite a range depending on what the what the solution is that’s all being offered and then there’s a regulatory challenge of how do you actually you know go after the types of things that you’re worried about and quite ensure that you know you know legitimate transactions are getting through so I think it’s probably a little bit of both great thank you and I yield back gentleman yields back the chair now recognizes the gentleman from New Jersey mr. Payne for five minutes Thank You mr. chairman and let me thank you for allowing me to sit in today with the task force and you know being a guest here and allowing the other members on the committee to go before me your thunder kind of gets stolen but I just like to associate myself with the comments mr. Davison of Ohio made in terms of cash yeah for me it’s about choice and all answers del rio’s and mr. Klein what happens to that segment of the country that does not come along with this move towards other currencies what happens to the grandmother that just can’t learn all of this rigmarole on the phone what happens to the child that their dad gives them a dollar to go get candy I mean when you have to carry a card now or here here’s some here’s a credit card go go get yourself a lollipop it’s about choice and that’s when the issue was raised his cash still King I don’t know if it’s King or not but in the United States of America there should be a choice and there are under served under Bank communities that are not going to ride this I still unfortunately don’t use PayPal because like I have not learned to use it yet and I would consider myself fairly well fairly savvy but but I there were just communities that I’m concerned about that I represent that are just not going to ride this this change and privacy issues cash is only the still only the one way that you have total privacy in this country wah wah the convenience store was just hacked several days ago 30 million people’s information 30 million Americans information forget about target several years ago so cash still really is really America is the American Way a legal dollar George Washington’s face on the dollar and we’re talking about doing away with that you’re doing away with a segment of the country the statistics are right behind you 34 percent of African Americans use cash that’s a major segment of the company country so what do you say to making sure that there is a choice in this country that’s what this nation was built on having a choice not that we aren’t going down that road but to not have a choice in the matter is my concern yes yes thank you I appreciate your comments very much I want to say that I’ve been doing this work since the mid 1990s and at that point I remember people were predicting the demise of cash and there were gonna be no more bank branches anywhere everything was digital and technology-based and that hasn’t borne out so I appreciate your comments and just want to note also that in New York City our City Council just last week passed a ban on cashless businesses for all the sort of reasons you outlined the impact that that would have the racially exclusionary impact it would have on keeping people out of certain storefronts which is just fundamentally problematic you know I when I started doing this work is when public benefits were starting to be transferred to electronic benefits cards and at that point our organization and many others raised some of the concerns that you’re mentioning well what would how would that impact people who don’t have easy access to bank branches or ATMs in order to access their food stamps and what we’ve warned about and have seen bear out is that people end up paying huge amounts of their public benefits and fees to access you know their cash benefits or pub you know publicly subsidized benefits they have to take buses to get you know use their benefits cards and things like that and so that’s just one small example but it bears out in many other ways so I think we absolutely agree and I think this panel agrees that cash shouldn’t disappear um the people should preserve should have their choice preserved and protected and that stronger action by Congress to make sure that people have you know that they are protected no matter which choice they make you know these are just fundamentally key things if we are going to build infrastructure that allows for greater options for people well thank you and I see my time is I’ll yield back gentleman yields and the chair now recognizes the gentleman from Wisconsin mr. style was recognized for five minutes thank you very much thank you chairman for holding today’s hearing I think we’ve heard a lot of discussion today that’s focused on the idea that innovation and the adoption of mobile payment technology can lead lead to financial exclusion there’s people in this country were unbanked and lack lack access to smart phones but we should be working I think to ensure that the public policy creates an environment where everybody benefits from innovation that we are creating I think there’s an opportunity here to talk a little bit about how we can use this technology to improve Financial Inclusion I look to mr. Ahmed and I think for us I think it’s important to step back maybe and just put a little bit of context to this and so I can I dug up some numbers Pew Research 96% of Americans on a cell phone 10 years ago there’s about 85% same study found that 81% of adults owned a smartphone back in 2011 as about 35 percent the numbers for smartphone ownership raised by white black and Hispanic adults this study found was nearly identical 80 to 80 79 percent reasonably identical rates and while lower income adults are less likely than those with higher incomes don’t a smartphone the overwhelming majority of respondents earning less than $50,000 per year did own a smartphone there’s some interesting data 71% of those owning earning less than $30,000 have a smartphone 78% for those earning between 30,000 and 50,000 dollars and we’re seeing this trend not only in the United States but globally 60% of adults in Brazil 52% of Mexico 41% in Kenya have smartphones and the numbers are continuing to rise at a very aggressive rate so given the adoption of smartphones in the near total market penetration I think we should be having a conversation about how mobile payments can foster Financial Inclusion rather than simply identify the risks of financial exclusion we should identify the risks but I think we should spend some more time on how this can actually help us moving forward and how technology can actually help those that are unbanked and so mr. Matt if I can ask you in your testimony you mentioned that I think quote here the most significant barrier to mobile payments for underbanked consumers is their poor compatibility with the way in which unbanked consumers often earn and use money end quote can you can you can you elaborate on that comment just a bit certainly so if your employer there’s a smartphone for us if your if your employer pays you in cash and then if you’re living in a community where most of the options available for you to get your groceries or to take transportation is the you know the common method of acceptance or the preferred method of acceptance is going to be cash then it makes a lot of sense for you to be using cash but I appreciate you highlighting the point about Financial Inclusion in the way that we’re thinking about it PayPal is really about financial health can we create value propositions using the full suite of financial services to say actually there’s a better option here if the digital payment is accepted by the merchant whether you’re offering credit the merchant isn’t incentive or a lower cost or on the consumer side so that that’s really where we’re trying to focus and to do it in partnership with a lot of the entities the is we go back and look at the the widespread adoption of smartphones linking tuning continuing trend lines across the United States and across different demographic groups can you come and how that is allowing PayPal to serve some of these individuals that were previously unbanked certainly no we we are we are riding a very strong trend in this space in the mobile payments in the mobile you know access space and we’re seeing mobile payments grow as a result of that so certainly a lot of our focus of our company whether it’s in venmo or you know a corporate pal product is to create better and more experiences using the mobile device for people to be able to use you know again everywhere they go I appreciate your comments I appreciate your time here today I I do think as we spend a lot of time today identifying some of the risks I think it’s important that we also identify a lot of the positives that some of these mobile payment technologies can assist those that are currently unbanked in our system thank you very much I yield back gentleman yields back and the chair will now recognize the ranking member for some closing remarks five minutes I Thank You mr. chair and again thank you for the committee for this interesting discussion it I really appreciate my colleague from Wisconsin I think pushing the reset button and getting us to refocus because a lot of what I hear when we talk about technology reminds me of what humans have dealt with since the beginning of time we fear what we don’t know in by acting before we really understand what we’re dealing with we have a tendency to drive innovation and more importantly the entrepreneur is responsible for it the great science everything else out we should lead when it comes to these technology advances I frankly I was listening to the comment when you said that we banned cashless businesses that’s actually kind of sad because in the next follow up was we need government to give us more solutions if you think back to 2007 I believe we had roughly 9,000 community banks Main Street across this country we had roughly 9,000 credit unions like the one that you chair a year later the crash we still had roughly after the crash between 2008 2010 or 11 we still had roughly 9,000 of each and then that Congress rushed in to help like Congress did with the savings and loan crisis and every other crisis because governments got to save us from ourselves and ever since its accelerated the pressures on small community banks and credit unions to the extent that we now have roughly I think less than 6,000 of each and we’re losing more every day rather than trying to create an environment where we’re creating more Main Street banking opportunities so the idea that government is going to solve it by by banning it and I just want to give you something because I think it’s funny when I hear from even one of my own colleagues the crypto is the preferred method of laundering money well my colleague mr. Paine just pointed out the only truly private thing left is cash we can identify people on the Internet I you can’t to Sara Lee identify somebody who’s carrying around suitcases of cash and I think the comment was el chapo had two hundred million dollars in cash on his property I had my guys check I don’t think he had any cryptocurrency by the way his son might have but he didn’t I I would suggest to anybody who’s interested again because I think the rhetoric really is this is Silk Road this is dangerous technology is going to disenfranchise because we don’t learn it by the way to my colleague who it says how what about the grandmother who doesn’t know where the child I agree with him but I’m one of those people that when I go through the checkout line at the grocery store and they say sir the self-serve is open oh no no I’m going to the person I want to talk to somebody the young people are going through besides if I go through the self-serve I want the the employee discount because I’m doing the job right I should get the discount I but I think while we should be concerned always and I respect and a very sensitive the fact that we are all thinking I hope in the same vein we want people to have access we want people to be empowered and to grow and be able to lift themselves up we just look at it a little differently I suggest if you haven’t take a look at the book the age of cryptocurrency this book begins with a story of Afghani women who are typically excluded and shunned from partaking in finances it’s a cultural issue I these Afghani women were using Bitcoin to build up a financial livelihood and a store value that is solely theirs this is the kind of empowerment that’s not something that I think we should just be tossing aside again because we can’t see all the things out on the horizon we have to make sure we’re very careful and in this institution in particular has to start moving a little quicker with the certainty questions that we talked about in the marketplace because at the end of the day that is where we’re going and I think people need to be very clear we can either help facilitate this technology advancement or it’s going to happen without us and God forbid it happens somewhere else where we don’t have any any say so again thank you to the to the committee witnesses and mr. chair thank you very much for having this hearing today absolutely thank you thank you for your remarks as well in closing I just do want to point out the the difficulty here that we face and you know I was in I was in Somalia last week we did a Codell there to the Horn of Africa and and I’m keenly aware of the need within Somalia for a secure banking apparatus to help that country recover and and all of the all of the big banks have left right and because of the threat of reputational damage due to the control of al-shabaab and terrorist elements in that country but you do see the need for or you know a value transfer system that is secure and that will allow that country to cut recover so you know clearly there are some advantages to be had in a digital system that is secure it’s a it’s a very different circumstance but I clearly see the benefits but I also see you know the the benefits that our regulatory system has has secured you know back in the most of our regulatory system on the financial side the traditional system has been created as a result of responses to calamities in this country right so we had 9,000 bank failures during the Depression 9,000 scholars came up in coordination with the SEC and others and created the FDIC so we have Federal Deposit Insurance Corporation and now you know we don’t even though we had you know major catastrophe and in the recession in 2007-2008 we didn’t see all the bank’s closing down like we did before so there were there are advantages to having those intermediaries and and so now I’m a bit concerned about the push for blockchain in a system that eliminates the intermediaries right it’s peer-to-peer Ledger so so we go around the Federal Reserve because it’s peer-to-peer we go Pete we go around the SEC we go around Treasury and FinCEN the Financial Crimes enforcement network we go around all these intermediaries that allow us to to to rebalance and correct some of the inequities so it’s it’s a big challenge but it’s it’s extremely interesting as it’s you know and I agree we got it we got to try to track a tackle list and get the best get the best out of a system like that while protecting against the worst aspects of what some of this new untested technology might might present so I want to thank you all for the wonderful testimony all of you brought your a-game here today and and really helped us work through some of these issues are extremely complicated but we won’t understand how this affects everyone right the banking industry has tended to gravitate toward the needs of the wealthy right I remember when I was an ironworker I was in I order for 20 years and and and I became Union presidents and we had a council so that the men and women on the jobs could go cash their checks at the end of the work day and I remember a bank a big bank still around and and told me as union president they didn’t want to do business with my workers anymore because the amount of money they were making on their transactions didn’t cover the cleaning of the rug because my guys and gals were coming in with muddy boots so you know that type of elitist attitude that we want to take care of the rich folk and and not not the workers so much and and you know that’s where the money is on the high end of this spectrum we have to be careful we have to be careful that if we’re designing a system that is it is inclusive of everyone and I think we can do it I think we can accomplish the the goals of that have been articulated up here we just got to be smarter about it part of it is good way and we engineer this and part of it is is the way that we not only engineer the architecture but also regulated on behalf of American people because we are the only group that can really interfere and intercede on behalf of those people in our economic system in our legal system so thank you very much for your testimony as always you just read this closing remember she’ll have five days without objection the following letters will be submitted for the record letters from the American common sense Cee MTS Coinstar the electronic payments coalition naka the electronic transactions association the money services Business Association the National Association of convenience stores the National Association of federally insured credit unions the payment card industry security standards Council and square and the American Bankers Association Javelin advises services and the Honorable mr. Donald Payne jr. thank you without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for their response and I respectfully request that our witnesses please respond as promptly as you are able without objections all members will have five legislative days within which to submit extraneous materials to the chair for inclusion on the record this hearing is now adjourned thank you all right folks well that is it that was the task for some in the House Financial Services Committee I don’t know about you that but that was kind of exciting because as much as politics can be boring I know they don’t get a lot done in Washington DC sometimes but them just talking about this is exciting to me and because we always call for regulatory clarity on this side it just gives me hope and that just all it does it gives me hope we know it’s presidential year and not I’m not a lot using it’s done in politics but especially during the presidential year but hopefully because some of the bills that are going through Congress now actually have bipartisan support so maybe it’s not overly political we get some of this stuff done in 2020 so again I am going to link in the comment section below at the beginning of this video I talked about the digital dollar project and also the 22 bills that are going through Congress one has become law there’s 21 left so I’ll leave those two links in the comment section below to those videos and please check them out and please drop some comments in the comment section about what you think is gonna happen with regulation in 2020 what you thought of this committee hearing that you just watch hopefully you enjoyed it thank you so much for tuning in to the cryptocurrency portal I really enjoy bringing you the crypto news all the time if you’re already subscribed to the channel thank you so much I really appreciate it if you’re not a subscriber yet hopefully this information that I’ve given you here has proven my worth and I would be honored with your subscription of the channel and please smash the thumbs up button if you like this video it really helps out the Google and YouTube algorithms and help me helps me get my message out so thanks again for tuning in to the cryptocurrency portal hope to hear from you soon [Music]

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