BaaS pullouts, Trump crypto: Top tech news September 2024

September 30, 2024 2:52 PM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In September's roundup of top tech news: Banks and credit unions continue to shift away from banking as a service, Donald Trump announces planned launch of World Liberty Financial cryptocurrency firm and more.

Click here to read last month's roundup of top tech news.

TikTok users react to a trend that spun up on the platform earlier this month, with users claiming they got free money from Chase by depositing bad checks and withdrawing the money before the check bounced.

Check fraud against Chase goes viral on TikTok

Article by Carter Pape

A form of check fraud known as check kiting went viral on TikTok this month, with JPMorgan Chase customers recording themselves writing a bad check, depositing it at an ATM, then withdrawing cash before the bank could bounce the check.

The scheme was portrayed as a glitch rather than a crime, creating the misunderstanding through seconds-long video clips that customers engaging in the practice would get to keep the money. Other videos showed lines at Chase ATMs of people supposedly looking to try the viral trend themselves.

"Let's go to the ATM, let's go to the ATM, let's go to the ATM," one person said to his friend in a TikTok video reacting to the trend.

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ABC News Hosts Second Presidential Debate

Hannah Beier/Bloomberg

What bankers need to know about Trump's World Liberty Financial

Article by Carter Pape

In a video posted on X on Sept. 12, former President Donald Trump said he would launch a new crypto company with his sons, Eric Trump and Donald Trump Jr. Eighteen-year-old Barron Trump is reportedly the project's "DeFi visionary."

"We're embracing the future with crypto and leaving the slow and outdated big banks behind," Trump said in the short video about the company, World Liberty Financial.

Trump has pledged during his presidential campaign to turn the U.S. into the "crypto capital of the planet," as he put it in an August video about World Liberty Financial. In combination with the imminent launch of his own crypto venture, the comments raise concerns that, if elected, he might use the federal government to help support a business tied to himself and his family.

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Inside the chamber of a quantum computer from Quantinuum.

Quantum leap: JPMorgan Chase, Wells Fargo push past laggard banks

Article by Penny Crosman

Quantum computing may not yet be dinner table conversation at the average American home, and it's not quite ready for prime time — McKinsey analysts have estimated that 5,000 quantum computers will be operational by 2030 — but it's getting faster and closer to practical use.

JPMorgan Chase, Wells Fargo, Citigroup and HSBC are among the banks testing quantum computing's ability to speed up applications, to alleviate bottlenecks, to protect digital assets and to use high-performance computing without ramping up energy consumption. They believe this will give them a competitive advantage when the technology is available for everyday use.

"I think this is a crucial time," said Marco Pistoia, head of global technology applied research at JPMorgan Chase. "It's critical at this point to invest in building a quantum team. Quantum computing is still in the R&D phase, as quantum computers are not yet powerful enough to be usable in production. However, it's important to become quantum-ready now."

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Adobe Stock

Credit unions rarely engage in BaaS. North Bay is an exception

Article by Miriam Cross

North Bay Credit Union is an outlier in the banking-as-a-service space.

The flurry of activity in BaaS is almost entirely restricted to community banks partnering with fintechs and other nonbanks to underpin their financial offerings. But the $121 million-asset North Bay is one of the few credit unions to participate as well, and one of the few to speak about it publicly.

"The vast majority don't do it and legally, it's challenging," said Greg Mesack, senior vice president of advocacy at America's Credit Unions, a credit union trade group.

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For the second time in less than three years, the Supreme Court has agreed to address the constitutionality of the federal agency that was created over a decade ago by the Dodd-Frank Act.

Samuel Corum/Bloomberg

How payment firms are responding to CFPB pressure

Article by Joey Pizzolato

The Consumer Financial Protection Bureau is inching closer to classifying earned wage access as credit, the latest in a series of moves to tighten rules for payment products that the agency says pose financial risks.

The CFPB just finished receiving comments on its plan to make earned wage access programs subject to the Truth in Lending Act, which would require certain providers to disclose fees and annual percentage rates similar to the rules for loans and credit cards.

This proposed EWA rule came at around the same time the CFPB released a report warning about the consumer impact of fees merchants charge for cash-back services, and a probe by the Department of Transportation into airline rewards programs following a CFPB hearing in May.

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Check FRAUDDATA — Carter Pape (Sept. 11, 2024).png

Fraud rate declines, yet costs consumers more

Article by Carter Pape

While there has been a plateau in the overall number of reports of fraud victimizing both banks and consumers, the number still remains far higher than pre-pandemic norms, and some fraud costs are still increasing.

That's according to data from the Financial Crimes Enforcement Network, or Fincen, which tracks suspicious activity reports, or SARs, filed by financial service companies about fraud, and the Federal Trade Commission, which tracks consumer reports to various government agencies and consumer advocacy groups about fraud and identity theft.

The data indicates that the sheer number of reports of fraud slightly decreased at the beginning of 2024 compared to the previous year. But, the total cost of fraud that consumers have reported is still increasing, and fraud against both consumers and banks is still worse than it was in 2019.

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Liam Kennedy/Bloomberg

How Fifth Third is embracing hot payment trends

Article by John Adams

With BNY, JPMorgan Chase and U.S. Bancorp making up just a partial list of banks undergoing major payment upgrades, Fifth Third is attempting to improve its ability to quickly move on real-time payments, pay-by-bank and other competitive necessities.

In September, Fifth Third entered a partnership with Trustly, a technology firm that powers open banking, using permissioned data sharing to enable customers to access multiple products through their bank account. The bank will combine Trustly's technology with tools from Newline by Fifth Third.

Fifth Third is competing against payment fintechs and other banks that are combining new payment processing technology and data analysis methods to sell a broad range of services to clients that includes not only payments, but one-stop access to other financial services and nonfinancial business products. "We see a bunch of new opportunities to add more support and richer information around the movement of money," said Tom Bianco, general manager of Newline by Fifth Third. "As we mine that data it will continuously get better."

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US dollar banknote replica for movie prop use on white background

Adobe Stock

Kentucky bank ATM dispenses fake $100 bills

Article by Carter Pape

Fourteen customers of Independence Bank of Kentucky, headquartered in Owensboro, received fake $100 bills out of the ATM at the bank's Providence branch in September.

The fake bills appeared to be movie or television props, reading on the back, "for motion picture purposes" and "in props we trust," according to television station WFIE in Evansville, Indiana, which first reported the story.

Independence Bank did not immediately return a request for comment. In a statement to the TV station, Independence Bank indicated that the error might have been caused by the ATM vendor that manages and maintains the machines, though the bank did not name the vendor.

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The U.S. Department of Justice (DOJ) headquarters

Andrew Harrer/Bloomberg

DOJ's Visa debit suit threatens to upend revenue models

Article by John Adams

The U.S. Department of Justice's lawsuit against Visa goes deeper than other government attempts to curtail credit card policies, creating a potential outcome that could affect hundreds of mobile wallets, banks and merchants — if the government can win.

"The remedies proposed cut to the heart of Visa's model and — there is no sugar coating it — they appear quite onerous," Barclays said in a research note, adding it would be "more damaging" to Visa than other regulations or restrictions.

Prior regulatory actions against card networks, such as the Durbin Amendment to the Dodd-Frank law, targeted technical practices or pricing, according to Barclays.

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Five Star to phase out its banking-as-a-service program in 2025

Article by Miriam Cross

The parent company for Five Star Bank in Warsaw, New York, is winding down its modest banking-as-a-service business.

On Monday, Financial Institutions Inc., which has $6.1 billion of assets and is the parent of both Five Star and Courier Capital, said Five Star would quit this line of business fully in 2025 to focus on its core community banking franchise. Five Star launched its first partnerships of this nature in late 2022.

This decision took several factors into account including "the contribution of BaaS to our core financial results, evolving regulatory expectations and a proposed rule regarding the re-classification of BaaS deposits as brokered, in addition to the future investments in talent and technology necessary to achieve scale," said bank CEO and President Martin K. Birmingham in a press release.

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