- Visa CEO Ryan McInerney backed a Consumer Financial Protection Bureau proposal on open banking during the card network’s earnings call Tuesday, calling it a win for Americans in allowing better consumer financial tools, and in giving businesses a clearer view of U.S. regulations.
- “The CFPB rule that they put out is good for Americans,” McInerney said during a conference call with analysts regarding fiscal fourth-quarter results. “It's great for clarifying the structure and the regulatory framework here in America. It's likely to be a catalyst for growth of open banking in the United States.”
- By contrast, McInerney took a more cautious approach to another impending government move, namely the Federal Reserve Board’s plan this week to revisit a regulatory cap on fees that can be imposed on debit card transactions.
Visa, the largest U.S. card network, regularly faces challenges to its business in the regulatory realm. Therefore, it’s a rarity to hear the company’s CEO complimenting a CFPB action. In this case, he was commenting on open banking, a trend that has swept across Europe and is catching on in the U.S. as a means for consumers to allow their personal data and financial information to be used across different financial services providers.
Fintechs have driven the trend by providing innovative tools to consumers, letting those customers draw their financial information away from legacy players such as Visa in some cases.
Interest groups for upstarts, including the Financial Technology Association, were quick to praise the federal agency’s proposal earlier this month because it’s aimed at making it easier for consumers to share deposit account and credit card data across financial institutions. With a slew of fintechs providing such services, open banking could mean increased business, or competition, for Visa.
To lean into the trend, San Francisco-based Visa bought the Swedish business Tink for about $2 billion in 2021, but some of its executives have been skeptical of whether the trend would have a meaningful impact. Meanwhile, Visa’s chief rival Mastercard has more proactively embraced the trend, saying it’s pursuing use cases.
Visa may be adjusting its view of open banking a bit following the appointment of McInerney as CEO this year, and his changes to the management team and the upcoming exit of the long-time leader Al Kelly.
Here’s how McInerney assessed open banking as a tool for consumers in his remarks: “It's a great opportunity for Americans to be able to put their own data to work in different types of digital tools that will help their own personal financial management, help manage their financial lives better, get a better view of their finances across multiple different providers.”
Debit cap review
With respect to another impending federal government move, McInerney was more circumspect. The Federal Reserve Board has said it will meet Wednesday to reconsider whether a legal cap on debit card fees is set at the appropriate level, per the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Fed sets the cap on those interchange fees and it’s required to produce a report related to the fees every two years.
Currently, the cap is set at 21 cents plus 0.05% of the value of the debit transaction, in addition to a one-cent fraud-prevention adjustment. The fee cap applies to banks and financial institutions that issue debit cards and have $10 billion or more in deposits. Despite merchant calls to reset it lower, it hasn’t changed since 2011.
“We'll obviously follow it very closely and when they do publish something, we'll take a look and see if it merits a response,” McInerney said.
“What's notable about our business model is we've proven that we can be resilient and have a strong business in regulated interchange markets, not regulated interchange markets, in markets that have (highly) regulated interchanges and lower regulated interchange,” the Visa CEO said.
Reg II revision impact
During the call, Visa executives were also asked about the impact of federal oversight in another arena, namely the Federal Reserve’s extension of Regulation II to increase competition in routing of debit transactions in the e-commerce realm. The clarified rule, finalized last October, was aimed at ensuring that network alternatives to Visa and Mastercard are available for routing online debit card transactions.
Processors Fiserv and Fidelity National Information Services, better known as FIS, operate smaller debit alternatives and have sought to make gains against the network rivals with help from the newly revised rule. Nonetheless, McInerney said Visa has seen no “meaningful impact” from that change.
With regard to Visa’s business, the CEO underscored opportunities for the company with respect to ramping cross-border payment services, including via remittance partnerships, and developing services and tools that allow the company to take more share from the remaining cash and check payment categories.
For the fiscal fourth quarter that ended Sept. 30, the company reported net income jumped nearly 19% to $4.68 billion over last year, on a revenue increase of 11% to $8.6 billion for the quarter over 2022.