Author: Rebecca Issacs

By: Chuck Fagan, President and CEO, PSCU

In October 2022, the Federal Reserve issued a final ruling on Regulation II (Durbin Amendment), which requires two unaffiliated networks on a debit card and sets a cap on debit interchange rates. In this ruling, the Fed clarified that the two unaffiliated network requirement also applies to the Card Not Present (CNP) environment and announced an implementation deadline of July 1, 2023.

PSCU has been very public in our opposition to the Durbin Amendment and our belief that it should be repealed. The Durbin Amendment took critical resources away from smaller financial institutions including the credit unions we serve, who, while they were exempt from debit interchange cap provisions, still saw significant declines in interchange revenue. As a result, these financial institutions were forced to offset the interchange revenue losses by raising other fees consumers pay (including monthly service fees and minimum balance fees). The Durbin Amendment hit the least affluent American the hardest, leading to an additional one million underbanked Americans.

As we move towards the implementation deadline of July 1, we continue to work closely with our clients to ensure they are compliant and – more importantly – prepared for the financial and fraud impact that the new Regulation II changes will have on their business. Looking ahead, we expect the following impacts:

• Financial institutions will see a rise in fraud and chargebacks. Most CNP volume flows over the dual message networks today, which have built and refined sophisticated risk tools since the beginning of online commerce. This is a wholly different environment than face-to-face commerce and requires the merchant, network and issuer to collaboratively fight fraud. As more volume flows over networks that have historically seen little CNP volume, we expect a significant rise in fraud that our clients will have to manage from an operational and risk standpoint.
• Clients will see lower revenues from CNP Transactions. The purpose of this regulation is to drive issuer revenues down to benefit merchants. As more transactions move from the dual message networks (which historically have higher interchange) to PIN networks (with lower interchange), there will be a corresponding financial impact – including lower revenues and less available funding for investments in systems.
• Clients will need to optimize their authorization and fraud policies for their second network. Current CNP authorization and fraud policies generally assume most of those transactions come via dual message networks. Similarly, authorization and fraud policies for transactions coming through PIN debit networks assume most of that volume will be Card Present, which has lower fraud rates. Issuers will have to refine their authorization and fraud policies to account for CNP transactions coming through PIN debit networks, incorporating the higher risk associated with these transactions.

We also remind our financial institution clients that there is no need to change their Card Present configurations; these regulatory clarifications only apply to the CNP space. As an example, financial institutions that have not turned on PINless for Card Present do not need to enable at this point, as doing so would likely have a negative financial impact.

We will continue to support our financial institutions and help them comply with the regulation, even as we continue to voice our opposition to it. Large retailers cannot continue to profit off the hardships of smaller American businesses and consumers.

Charles E. (“Chuck”) Fagan III has served as PSCU’s president and chief executive officer since April 2015. In this role, he leads the strategic direction of the company and oversees all aspects of PSCU’s operations, ensuring the delivery of best-in-class payments solutions, service, data security, and successful growth for the company’s Owner credit unions.

His career in the credit union industry spans over three decades. Prior to rejoining PSCU, Fagan served as president and chief executive officer of the Credit Union Executives Society (CUES), a membership association dedicated to educating and developing credit union executives and emerging leaders, from January 2013 to April 2015. He is an advocate for the credit union industry and an active member of the community. Currently, Fagan serves as a member of Visa’s Executive Client Council, a member of the Florida Chapter of the American Cancer Society’s CEOs Against Cancer and a member of the Advisory Board for the College of Business and Economics at Longwood University. 

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Back by popular demand, Co-op is again asking for your selfies to support this year’s #ShadesUpforKids campaign to raise money for Children’s Miracle Network Hospitals and the National Credit Union Foundation.

What is #ShadesUpforKids?

Co-op Chief Experience Officer Samantha Paxson doesn’t love plane travel but has found it helps when the window shades are up. And it turns out she is not alone. “In previous years, I received a lot of messages from friends and colleagues empathizing with my feelings about flying with the window shade up, so I decided to see if I could spark a something fun around it – and raise some money in the process.”

For every shade raised, “selfied” and tagged between now and the conclusion of THINK 23 (May 2-4, 2023), Co-op will donate $10 to both Children’s Miracle Network Hospitals and the National Credit Union Foundation, up to $10,000.

The goal is to raise awareness about the power of credit unions helping people in their financial lives, whether that’s protecting families from a financial wipe out due to a child’s medical emergency or enhancing prosperity with ongoing financial wellness.

Let’s “shed a little light” and raise a little money for the kids who help put the purpose in our purpose-driven movement: #ShadesUpforKids.

It’s simple – the next time you’re flying somewhere:

1. Raise your window shade.
2. Take a selfie.
3. Post it to LinkedIn with the hashtag #ShadesUpforKids.

Terms and Conditions apply.

Be sure to raise your window shade on the way to THINK 23 in Tucson, AZ. Register now for the credit union industry’s premier growth strategy conference to attend either in person or our new virtual experience option.

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Small farms are plentiful in Hà Giang, a province in the forested hills of northern Vietnam where Luu Thi Hoa started Po My, an agricultural cooperative that sells peas, leafy greens and honey from local farms.

Hoa’s business not only supports her family — it also provides sustainable livelihoods for her community. But like many local business owners, Hoa took a major hit when the COVID-19 pandemic brought tourism in Vietnam to a standstill.

Hoa considered herself fortunate. She had access to programming through CARE, a global humanitarian organization that created the Ignite program to help build entrepreneurship among underserved micro- and small-business owners. She credited the program, supported by the Mastercard Center for Inclusive Growth, for boosting her financial management skills, which helped her refine her business operations and achieve a better-work life balance. But not all women entrepreneurs can get this kind of help.

All across the globe, women seeking to achieve economic empowerment often face three major obstacles: income inequality, digital inequality and information inequality.

Income inequality is an ongoing problem that was only exacerbated by the pandemic: 90% of women who lost their jobs became economically inactive, pushing men and women further apart on the already inequitable economic spectrum.

In today’s world, digital inequality makes it even harder for women who remain in the workforce to obtain income parity. More than 50% of women are offline, and women are 20% less likely than men to own smartphones. Without access to the full power of the digital economy, female entrepreneurs cannot integrate digital technologies into their businesses to reach new customers or reap the efficiencies that technology affords.

That lack of digital access also creates information inequality, in which men have more access to data and analytics that can take a business to the next level.

A Citigroup analysis earlier this year found that gender parity in business growth could increase the global GDP by as much as $2 trillion and generate between 288 million and 433 million jobs. Given that, it’s clear everyone would benefit from building an economic future that works for women. Here are three principles that guide our work:   

01
Act with gender intentionality

We need to think about the specific barriers that women face when we design products, services and programs to deliver the best outcomes.

In Pakistan, the Center is working in partnership with CARE to ensure that financial service providers are designing financial products with women entrepreneurs in mind. For instance, UBank offers a loan product that accepts nontraditional forms of collateral like gold jewelry. Its financing includes educational programs, such as skills building, mentorship and digital tools. 

02
Make data work for women

Data can serve as a powerful ally in the fight for greater equity. By collecting, analyzing and using good-quality disaggregated data, we can improve our existing products and services to suit women’s needs — or spark innovative new ways to better serve women. 

Through Data.org, the Center has supported Women’s World Banking to explore how AI-based modeling and credit scoring can assist female entrepreneurs in India, Mexico and Nigeria. The initiative assesses how algorithms in digital credit applications can increase lending to women borrowers, studies other ways to apply machine learning and AI and explores the challenges facing digital financial services as a result of COVID-19.

03
Reimagine cross-sector partnerships

Instead of falling back on traditional models of philanthropy and public-private partnerships, we must think creatively about how to effectively deploy our assets, including human capital, aggregated data and technology. That means rethinking how we structure partnerships with corporations, nonprofits and government entities.

For instance, we teamed up with global sustainability organization BSR and Levi Strauss & Co. to create a digital payment system that gave garment workers in Egypt — half of whom are women — more control over their income. At the Center, we worked with an NGO to teach garment workers how to use their new digital wallets while our brand partner, Levi’s, harnessed its factory network, brand influence and philanthropic foundation to get factory management on board with the plan. Now we’re working to scale that program to nine more factories supporting global brands.

The world has never offered women a smooth road to financial empowerment, but we can ease their journey, from factories in Egypt to farms in Vietnam and beyond. We are working to equip women like Hoa with the knowledge and technology they need to take charge of their future — and to ensure the future is ready for them to succeed.

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