Zelle outage, FedNow, Apple Card: Top banking news for July 2023

July 31, 2023 11:46 AM

In July's roundup of American Banker's favorite stories: A Zelle outage at JPMorgan Chase could cause headaches for other banks, talking points for understanding FedNow, the Elkhart, Kansas-based Heartland Tri-State Bank is shuttered by the Federal Deposit Insurance Corp. and more.

Click here to read last month's roundup of banking industry news.

JPMorgan Chase handles at least twenty-two percent of Zelle transactions, according to Crone Consulting LLC, which estimates that the bank processes over $2 billion in roughly 27 million transactions between as many as 54 million unique users per day.

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Zelle outage at JPMorgan Chase is red flag for banks

Article by Charles Gorrivan

An outage at JPMorgan Chase disrupted Zelle transactions on July 25, inciting user complaints that spilled over into the following day. The fallout for Zelle and its banks could last much longer.

It was the second Zelle glitch in six months that involved a bank tied to Early Warning Services, the P2P network's owner. The JPMorgan Chase interruption follows an outage at Bank of America that disrupted Zelle payments in January. Both banks are among the seven co-owners of Early Warning.

Glitches often occur when digital payments flow through older core banking platforms. That problem could grow as more transactions occur on networks integrated with The Clearing House's RTP network and the Federal Reserve's real-time-payment processing system FedNow.

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What bankers need to know about FedNow

Cardshow by John Adams, Kyle Campbell and Kate Fitzgerald

The launch of FedNow, the Federal Reserve's instant-settlement system, raises many questions for banks, card networks and fintechs.

FedNow joins The Clearing House's RTP Network in supporting instant settlement in the U.S. In an email, David Watson, president and CEO of The Clearing House, said "The Clearing House which operates the RTP network, the instant payments system in the United States, welcomes FedNow to the real-time payments space. The launch draws more attention to how consumers and businesses are looking to send and receive money instantly between their accounts, which the RTP network has been enabling for millions of bank and credit union customers since 2017."

Any bank that's considering joining this new payment rail will have to consider the costs of processing and of any technology investment needed to properly route transactions to — or from — this new platform.

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David Paul Morris/Photographer: David Paul Morris/

How Goldman Sachs' deal with Apple went sour

Article by Kate Fitzgerald

Apple can be a brutal negotiator, and Goldman Sachs has apparently had enough, according to reports that the New York firm wants out of its partnership to support Apple's credit card and related savings accounts.

Payments industry experts say it's not completely surprising that nearly four years after the Goldman-issued Apple Card launched, Goldman's hopes of using the partnership to build a digital-era consumer finance powerhouse haven't materialized.

"In short, Goldman didn't say 'no,' enough to Apple," said Hugh Tallents, a senior partner at New York-based strategy consulting firm cg42.

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The U.S. Supreme Court has agreed to hear a case about the Securities and Exchange Commission's use of administrative law judges. The court's decision could impact the enforcement powers of a broad range of federal agencies, including banking regulators.

Anna Rose Layden/Bloomberg

Supreme Court could limit enforcement powers of U.S. banking agencies

Article by Kevin Wack

The U.S. Supreme Court will hear a case that could limit the enforcement powers of federal banking regulators, forcing agencies to go to court in situations that would otherwise be handled through administrative processes.

The specific lawsuit involves the Securities and Exchange Commission, but it has big implications for a broad range of U.S. regulators. In the banking realm, those agencies include the Federal Deposit Insurance Corp., the Federal Reserve, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.

Some legal observers say that the justices — who agreed to take the case in late June — are likely to uphold a ruling by the 5th U.S. Circuit Court of Appeals. The appeals court sided with a hedge-fund founder who challenged the SEC's authority to bring an enforcement case through the administrative law system.

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A JPMorgan Chase Bank Branch Ahead Of Earnings

One area of focus for the bank is using advanced artificial intelligence to detect business-email compromise.

Angus Mordant/Bloomberg

JPMorgan Chase using advanced AI to detect fraud

Article by Penny Crosman

In Ryan Schmiedl's work protecting JPMorgan Chase from fraud of all kinds, business-email compromise has been the most devastating type of attack lately.

Fraudsters look for the weakest link, the place that is least protected, Schmiedl said. And they often find it somewhere inside a corporate client.

"In a lot of cases, they're attacking corporates, because there are so many people in a corporate entity and they don't communicate a lot," Schmiedl — who is global head of payments, trust and safety at the bank — said on a panel at Fintech Connect last week.

He oversees JPMorgan's efforts to detect fraud and financial crimes through fraud controls, sanctions screening, know-your-customer checks and other means. Before joining the bank, he had a similar role at Amazon.

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CFPB's Chopra on late fees, Big Tech and a looming Supreme Court case

Cardshow by Kate Berry

Rohit Chopra, the director of the Consumer Financial Protection Bureau, has racked up huge penalties against big banks and has his sights set on large technology companies. Despite the looming threat of a Supreme Court case that could result in the CFPB's funding being deemed unconstitutional, Chopra is optimistic about changes ahead that he thinks will provide more protection to consumers.

The Consumer Financial Protection Bureau celebrated its 12th anniversary on July 21, prompting Chopra to discuss the agency's work including a controversial proposal to set credit card late fees at $8.

In a wide-ranging interview with American Banker, Chopra discussed why banks are getting additional supervisory scrutiny for assessing multiple fees when consumers overdraw their bank accounts. He also discusses the bureau's plans for open banking that would help consumers more easily switch banks, and how the CFPB plans to create a more level playing field in the fast-changing world of real-time payments.

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The Federal Deposit Insurance Corp. announced the night of July 28 that Kansas-based Dream First Bank would be acquiring all deposits and most of the assets of shuttered Tri-State Bank.

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Dream First Bank assumes Heartland Tri-State Bank's deposits

Article by Ebrima Santos Sanneh

The Federal Deposit Insurance Corp. announced July 28 that it had entered into a purchase and assumption agreement with Dream First Bank of Syracuse, Kansas, to assume all of the deposits of Heartland Tri-State Bank of Elkhart, Kansas.

The announcement came shortly after the Kansas Office of the State Bank Commissioner shuttered Heartland and appointed the FDIC as receiver. The FDIC said the agreement will cause a $54.2 million hit to the Deposit Insurance Fund, which it says is the least costly resolution.

FDIC said Heartland Tri-State Bank branches will reopen normally under the Dream First Bank name on Monday, July 31, and customer accounts will automatically transfer over to the new company.

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Lenders participating in Underwriting for Racial Justice will be able to exchange best practices on how to gauge a borrower's ability to repay. They will also submit data about loans they make to individuals from marginalized communities, which will then be anonymized and compiled into reports that get shared with other members of the group.

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Banks, credit unions join in push for racially equitable underwriting

Article by Jordan Stutts

A new initiative involving 20 banks, credit unions and other financial institutions is reassessing traditional ways of determining creditworthiness in an effort to expand opportunities for marginalized borrowers.

The collaboration, Underwriting for Racial Justice, aims to create new lending criteria for lower-income U.S. borrowers who have historically faced higher barriers to obtaining financing.

The goal is to address bias by unpacking norms in underwriting, said Erin Kilmer Neel, executive director at Beneficial State Foundation, the nonprofit organization that is coordinating the initiative.

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Leigh Brady is the new CEO of the $50.8 billion-asset State Employees Credit Union in North Carolina.

SECU's new CEO talks branches, lending and a 'measured' approach to tech

Article by Ken McCarthy

State Employees Credit Union in Raleigh, North Carolina, may be the second-largest credit union in the U.S. by assets, but it still has plenty of room to grow.

The $50.8 billion-asset credit union appointed a new CEO last month, with a plan to get the institution caught up to its peers in its use of technology while also keeping the pace of growth of its branch footprint.

The promotion of Leigh Brady to CEO also means that women are leading the two biggest credit unions in the country. The $166 billion-asset Navy Federal Credit Union in Vienna, Virginia, named Mary McDuffie as CEO in 2018.

The credit union industry has a lot of women leaders already; a 2021 study by the Credit Union National Association found that 51% of credit unions have female CEOs versus 3% of banks.

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As part of efforts to increase the diversity of their workforces, many banks have hired chief diversity officers or elevated such roles to the C-suite. Others have made commitments to recruit more employees from historically Black colleges and universities.

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What the end of admission preferences means for banks, credit unions

Article by Allissa Kline

The Supreme Court's recent ruling on affirmative action isn't binding on the U.S. financial services industry, but its impacts on lenders could still be substantial.

Two weeks after the June 29 decision, there is a growing consensus that diversity, equity and inclusion policies and programs at banks and credit unions — and across corporate America — are about to face a lot more scrutiny. Some programs could face legal challenges that are inspired by the Supreme Court's ruling that race cannot be used as a factor in college admissions.

Banks and credit unions, and their corporate counsels, are likely now in the midst of trying to figure out the possible ramifications of the court's decision. Initiatives that could be under the microscope include internship programs for minority students and representation goals aimed at increasing workforce diversity, legal experts say.

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