The Biden Administration is cracking down on "junk fees," which generate over $64 billion annually for a range of companies, including internet service providers, financial institutions, payment processors, event producers and more. The FTC and the CFPB proposed new rules targeting fees identified as deceptive, including credit card surcharges. Consumers have expressed frustration about unexpected fees, such credit card surcharges, which can add up to 3 to 5 percent to transaction costs. Credit card surcharging is permitted in 48 states, and the Durbin Amendment allows discounts for cash payments.
Credit card surcharge and cash discount programs may face stricter regulations under the FTC's proposal, which emphasizes the need for clear disclosure of additional costs to consumers before they make a purchase. Failure to comply could result in monetary fines. Restaurants have been a focal point of criticism due to various fees added to bills. The FTC's proposal may require inclusive pricing on restaurant menus to prevent unexpected credit card usage fees. The National Restaurant Association opposes the proposal, advocating for transparency but not an outright ban on fees, especially for restaurants.
Elon Musk aims to transform X, formerly Twitter, into a comprehensive financial hub, encompassing various financial transactions, not just payments. He envisions X as the center of Americans' financial lives, encompassing money, securities and more.
At an employee meeting, Musk expressed confidence in rolling out this vision by the end of 2024. He hinted at potential cryptocurrency integration but focused on X's efforts to combat spam and scams.
Musk's interest in financial services dates back to 2000, when he initially envisioned a more comprehensive product than PayPal, which he co-founded and later sold to eBay. In the past 14 months, X has obtained money transmitter licenses in 12 states.
The Office of the Comptroller of the Currency introduced "special purpose" charters, which could potentially provide federal money transmitter licenses mainly for fintech companies. Many fintechs already possess state-issued money transmitter licenses and facilitate virtual currency exchanges. Money transmission, historically dating to the 19th century and now regulated at the state level, involves sending money across distances, often through electronic networks today.
Companies like Western Union and MoneyGram offer these services for such functions as bill payments, money transfers and online purchases.
The J.D. Power 2023 U.S. Small Business Credit Card Satisfaction Study revealed that rewards programs play a pivotal role in small business customer satisfaction with credit card products. As the economic outlook improves, credit card issuers are delivering services and rewards programs that boost customer satisfaction and spending, researchers found.
However, elevated interest rates are causing concern, particularly regarding fee reasonableness and competitive rates. Managing these areas will be crucial for issuers as more small businesses seek low-interest payment plans in the coming year, researchers advised. Overall, satisfaction with card issuers has increased by seven points compared to 2022, surpassing the pre-pandemic peak from 2019.
The report also indicates small businesses' financial situations have improved, with 38 percent reporting better financial standing than the previous year, and fewer businesses carrying revolving debt (41 percent down from 44 percent in 2022). Small businesses are increasingly using personal and business credit cards for various expenses, including office supplies, operating costs, travel, inventory, meals and raw materials.
Higher spending, particularly $20,000 or more per month, correlates with greater satisfaction, driven by better alignment of spending with rewards programs and increased interaction. American Express tops the list for small business customer satisfaction, primarily due to its robust rewards programs. Other highly-rated card issuers include Capital One, PNC, Citibank, Bank of America, Chase, and U.S. Bank. But concerns persist about credit card terms, especially among businesses with low annual revenues.
The bipartisan Close the Shadow Banking Loophole Act was introduced in the Senate to regulate nonbank financial entities more like banks, preventing them from benefiting from federal deposit insurance without approval from the Federal Reserve. The bill, spearheaded by Senator Sherrod Brown, D-Ohio, and John Kennedy, R-Louisiana, particularly targets industrial loan companies (ILCs), which have expanded their financial services while avoiding the regulatory scrutiny faced by traditional banks and credit unions. ILCs have leveraged a loophole in the Bank Holding Company Act, creating what senators refer to as a "shadow banking system." Square (now Block) is among the companies that have obtained ILC charters, allowing it to offer services like Square Loans and Square Savings with FDIC coverage.
The proposed legislation aims to close this loophole and place entities like Square Financial Services under the Fed's regulatory oversight, aligning them with traditional banking rules. Supporters maintain that this regulatory tightening is necessary to prevent nonbanks from gaining unfair advantages over banks and credit unions, ensuring consumer protection and financial system stability. The bill has received support from both financial institutions and consumer groups.
According to a new report by the Mobey Forum, embedded finance is set to have a significant impact on the banking industry in both Europe and the United States. By 2026, it is predicted that 15 percent of European finance will be embedded, while in the United States, embedded finance is expected to grow from its current $2.6 trillion, accounting for 10 percent of GDP, to reach $7 trillion.
Embedded finance is transforming the banking value chain by integrating financial services directly into retailers' sales channels, researchers noted, adding that this allows banks to own the customer experience from end to end and offer trusted financial services within a convenient and familiar environment.
Key benefits of embedded finance, researchers found, include instant customer access to tailored financial solutions, the creation of new revenue streams for businesses, reduced costs through digital distribution, and improved customer value and retention. The report suggests that banks can leverage deep integrations to optimize customer engagement and actively participate in the retail value chain.
Researchers point out that by connecting with customer-facing third parties, financial institutions can access additional revenue opportunities, ranging from 10 percent to 100 percent of the total value created within the value chain. Various strategic options, such as creating marketplaces, using APIs or partnering with providers, can be pursued to capture these opportunities. 
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