Top banking news this month: August 2022

August 31, 2022 2:40 PM

In this month's roundup of American Banker's favorite stories: Small and midsize businesses are growing increasingly frustrated with the quality of service offered by their banks, many of the top commercial banks continue reforming practices for nonsufficient-funds fees, information technology leaders at many of the largest institutions eye a passwordless future and more.

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

The Consumer Financial Protection Bureau is expected to issue a guidance detailing the extent to which banks and credit unions are liable for fraud on digital payments platforms like Zelle.

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A showdown is coming over who is liable for P2P payments fraud

Article by Kate Berry

The Consumer Financial Protection Bureau is expected to issue guidance soon on banks' liabilities for fraud perpetrated on digital payments platforms like Zelle, setting up a major regulatory fight that could play out for years.

Financial institutions claim they cannot be held liable when a consumer incorrectly sends an electronic payment to the wrong person or gets tricked by a criminal and authorizes a payment that turns out to be a scam or fraud.

Banks and credit unions are likely to sue the bureau if it tries to assign broad liability for fraudulent payments authorized by consumers. Some expect the CFPB will need to issue a rulemaking if it tries to mandate that consumers get repaid for fraud.

Click to read the full story.

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The companies making 2022 a busy year for B2B payments tech

Article by John Adams

Business payments have been the caboose on the innovation train, with many companies sticking to paper modes such as checks, partly out of inertia and partly to stretch payment times out as much as possible.

But the digital wave of the past two years is boosting demand for consumer-style digitization in business payments, as is economic pressure to use digital processing as a means to more closely manage cash positions.

The tech trend and the sheer size of the business payments market are providing opportunities that are too good for payment companies to pass up.

Click to read the full story.

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Why businesses are growing frustrated with the service at their bank

Article by Jordan Stutts

Small and midsize businesses are increasingly frustrated with the quality of service they're receiving from their banks, which are struggling with the effects of high employee turnover.

Among business clients that recently switched banks, 44% said that a primary reason was dissatisfaction with an employee assigned to their accounts, according to a survey conducted in May and June by Coalition Greenwich, a benchmarking provider that is part of S&P Global. That figure was up from 40% in September 2020 and from 43% in January 2022.

Another cause for concern within the industry: Some 26% of the firms that switched to a new bank pointed to the previous bank's lack of knowledge about their business as a primary reason — up from 17% less than two years ago.

Click to read the full story.

AB-NSF-COLLAGE-081822 WITH Hutington, TD, Citigroup, Citibank, PNC

Among the nation's 20 largest commercial banks, 13 including Citigroup and PNC have ditched nonsufficient-funds fees while four others including TD Bank are set to eliminate them by year-end. That leaves Huntington and two others that are still charging such fees.

The rapid demise of NSF fees

Article by Allissa Kline

Last year at this time, all but two of the 20 largest commercial banks in the nation charged fees to consumers whose accounts did not have enough money in them to pay for certain purchases.

Today nonsufficient-funds fees, which are also sometimes called returned-item fees, are largely a thing of the past among the top 20 banks. Thirteen of them have ditched NSF fees as part of broader overdraft reform and four more are scheduled to do the same by the end of this year, according to an American Banker analysis of the banks' policies around consumer NSF fees.

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Clockwise from left: Kim Kirk, chief operations officer at Queensborough National Bank and Trust Company; Lauren Sparks, founder and CEO of Agility Bank; Allan Rayson, chief innovation officer and chief technology officer at Encore Bank

"If the product fit is right, a smaller company will be more focused on you as a client," said Kim Kirk, chief operations officer at Queensborough National Bank and Trust Company, pictured at left. Lauren Sparks, founder and CEO of Agility Bank, is top right; Allan Rayson, chief innovation officer and chief technology officer at Encore Bank, is bottom right.

Community banks find right fit with smaller core providers

Article by Miriam Cross

Queensborough National Bank and Trust Co. is on the hunt for a new core system.

On the Louisville, Georgia, community bank's shortlist are the three legacy providers that have owned the core market for years — FIS, Fiserv and Jack Henry — as well as a lesser-known company based in Little Rock, Arkansas: Smiley Technologies.

"One reason we chose to include them was to see what a smaller core would offer," said Kim Kirk, chief operations officer at Queensborough.

Click to read the full story.

Bad password management is only one problem plaguing credentials. Banks also believe passwords are not user-friendly. Developments toward a post-password future could change that.

Carter Pape/American Banker

Big tech is building a passwordless future. Banks want to join in.

Article by Carter Pape

Bank IT leaders believe almost unanimously that the time has come to move beyond passwords to a more secure form of authentication, known to many as passwordless.

As the name suggests, passwordless authentication involves logging a user into a system without using a password. That can involve numerous alternative methods, from using biometrics to a USB key or an app on a trusted device.

Just how widespread is the belief that passwords need to go? According to a recent survey, 89% of IT security leaders at financial services firms believe passwordless authentication ensures the highest level of authentication security — better than passwords and multifactor authentication.

Click to read the full story.

Bolivar believes Suncoast's decision to keep branches open during the pandemic was the right move. "A lot of other financial institutions are stating that they've seen their branch traffic slowed down. Ours has not. We are at pre-COVID levels, in terms of members coming in," she added.

Bill Serne

Where credit unions are beating banks in customer experience

Article by Victoria Zhuang

Jennifer Bolivar, senior vice president of business transformation at Suncoast Credit Union in Tampa, Florida, remembers with pride how her team served a member who came into a Suncoast branch recently and got help with a car loan.

"Of course, they had a car loan with someone else. Refinancing it with us put an additional $400 a month in their pocket. What can you do with $400? I mean, think about that," Bolivar said. The member's mother heard about it, and the buzz built from there.

"That in and of itself spread the word that we've got something to offer from a product standpoint," Bolivar said.

Click to read the full story.

Senator Mark Warner, D-Va., left, speaks to Sen. Mike Crapo, R-Idaho, prior to a hearing in the Senate Finance Committee. Warner and Crapo recently announced the creation of a bipartisan Community Development Financial Institution Caucus in Congress, signaling the growing influence of the once-marginal industry sector.

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CDFIs are starting to flex their post-pandemic clout

Article by Brendan Pedersen

WASHINGTON — The federal government's response to the COVID-19 pandemic catapulted a niche sector of specialized community development lenders to a new level of prominence in American finance.

Now, as the industry matures into a burgeoning political force in the nation's capital, some of the sector's leaders are eyeing ambitious policy changes in coming years that could transform the sector's long-term trajectory, including a push for a historic increase in government funding, new tax incentive programs and even a national charter for nonbank community lenders.

Community development financial institutions — better known as CDFIs — are a set of Treasury Department-certified lenders designed to do a certain amount of business in underserved communities across the U.S., often in the form of small business and affordable housing loans. They include banks, credit unions, loan funds and venture capital firms.

Click to read the full story.

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How badly was Bread burned by its online credit card payment glitch?

Article by Kate Fitzgerald

Bread Financial Holdings — formerly Alliance Data Systems — recently modernized its private-label credit card platform by moving tens of millions of records to the cloud, but a technological outage turned the project into a customer service nightmare.

The outage in late June and early July prevented some customers from making on-time payments for their credit card bills with many of the 130-plus retailers Bread serves through its Comenity Bank subsidiary. The issue sent inflation-stressed users across the U.S. to register complaints on social media and with regulators.

Many Bread customers have documented their frustrations on Twitter and Facebook, including their unsuccessful attempts to reach customer service agents. Complaints continued to spread throughout the July 4 weekend, and many customers also alerted the Consumer Financial Protection Bureau.

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Delinquency rates on bank loans for office space have been climbing steadily — from 0.2% in the fourth quarter of 2019 to 1.8% in the first quarter of this year, according to Trepp's TALLR database.

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FDIC promises more scrutiny of banks' commercial real estate loans

Article by Kevin Wack

The Federal Deposit Insurance Corp. plans to increase its scrutiny of banks' exposure to commercial real estate loans, citing uncertainty about the future of work and commerce in the wake of the COVID-19 pandemic.

The agency said that its examiners will put particular attention on testing newer loans, as well as loans within subsectors and geographic areas that are experiencing stress, and those that are vulnerable because borrowers are paying higher interest rates.

In explaining the sharper focus, the FDIC pointed to rising interest rates, the effects of inflation and supply-chain problems, as well as pandemic-related changes in the use of commercial real estate.

Click to read the full story.