While fintechs would lose a significant amount of interchange revenue – often one of their key income-generating activities – traditional financial institutions who have never benefitted from this revenue would gain a competitive advantage.
BOSTON (PRWEB) April 12, 2021
Revenue from interchange fees makes up a large share of many fintechs’ income, but a letter from The Clearing House (TCH) to the Federal Reserve Board may change regulations and cost fintechs much of this profit. The prepaid value chain is made up of a complex web of players, with some benefitting more from interchange revenues than others. Mercator Advisory Group’s latest research report, An Exploration of the Complex Prepaid Market and How a Change in Reg. II Could Unravel Fintechs, discusses TCH’s letter and its possible implications – intended and otherwise – on the prepaid market.
“In effect, answers to the TCH’s FAQs could dramatically transform the prepaid market. While fintechs would lose a significant amount of interchange revenue – often one of their key income-generating activities – traditional financial institutions who have never benefitted from this revenue would gain a competitive advantage. Smaller fintechs and companies that partner with small issuers would also benefit from their larger fintech competitors’ reduced interchange revenue,” wrote James O’Brien and Laura Handly, market research analysts at Mercator Advisory Group and authors of the report.
Highlights of the report include:
- Mapping of the complex prepaid value chain and the path along which interchange revenue flows
- Close examination of Reg. II and the ways in which TCH’s letter could alter its interpretation
- Specific examples of the ways in which powerful fintechs have taken advantage of what TCH sees as a loophole in Reg. II
- Analysis of the fintech prepaid card model and the degree to which it is vulnerable to proposed changes
This report has 11 pages and 4 exhibits.
Companies mentioned in this report include: Bancorp, PayPal, Robinhood, Sutton Bank, and The Clearing House.
Members of Mercator Advisory Group’s Debit and Alternative Products Advisory Service have access to this report as well as the upcoming research for the year ahead, presentations, analyst access, and other membership benefits.
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About Mercator Advisory Group
Mercator Advisory Group is the leading independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors. Mercator Advisory Group is also the publisher of the online payments and banking news and information portal PaymentsJournal.com.