It came out this week that Republican candidate for President, Mitt Romney, actually worked at Bain Capital, his private equity fund, for a couple years longer than he has claimed publicly. Whether this matters or not will take some time to sort out, but it won’t be the last we hear of it this year, that’s for sure. Mitt was doing something that doesn’t mix well with his political career — politicians should probably not be laying working-class people off, for example. But sometimes we do things we shouldn’t be doing, or aren’t used to doing. And this week, we saw a lot of that from banks and nonbanks: there’s some role-swapping going on in the industry, and that’s a good thing.
For example, Chase announced the nationwide launch of its prepaid card, Liquid, this week. It’s the first prepaid card that can offer the full convenience of a nationwide retail bank. And it has low, straightforward fees. It could be a suitable replacement for a checking account, provided you don’t have to write checks. Chase isn’t who you’d think of first when you think of prepaid — but they might be soon. In fact, you might soon see this sort of card replace your basic checking account, the way things are going — payment volume over prepaid cards is poised to grow by 22 percent this year.
Vanguard, the brokerage firm, might be stepping into the retail banking world. Like its competitors Fidelity, Charles Schwab, Scottrade, and ETrade already do, Vanguard is considering offering deposit accounts. Not a typical business for a large brokerage, but it’s what their customers want.
FICO developed a new credit score that looks beyond traditional credit data. It taps into property records, legal filings, alternative lending services, child-support obligations and many other factors, in order to develop a broader picture of consumer creditworthiness. It will help some borrowers and hurt others, but in theory it should give all parties a better understanding of consumer credit risk. You probably wouldn’t expect FICO to be digging around your child support records, but there they are — and it might help you out in the end, especially if you have no child support obligations.
In the payments world, the thorn in everyone’s side is interchange: how can we get payments processors and banks to support a complex and robust payments ecosystem without crippling retailers with fees? You’d normally consider this to be credit card companies’ jurisdiction (because it is; they set interchange), but LevelUp, the mobile payments platform, made an interesting announcement on that front this week. LevelUp won’t charge merchants the interchange that it pays. Instead LevelUp will make its money by charging businesses for the promotions that it enables. Marketers toying with interchange? It’s a strange world, but someone needs to fix it — there’s a lot of money at stake.
Speaking of interchange, Visa and MasterCard settled a class-action lawsuit from a group of large retailers on Friday. Merchants, who had alleged noncompetitive behavior by card issuers and banks, won at least $6 billion in the settlement. Consumers won … well, nothing really, since no one truly expects retailers to pass on the now-lower costs of swipe fees to customers.
In other financial product news, we learned that TD Bank will be extending its banking hours until 8 p.m., Monday through Friday. Also, student checking accounts will be losing their perks at TD Bank, SunTrust and BofA — sorry freshmen! And finally, Regions launched a new line of revamped rewards credit cards…but they’re not all that great.
And this, we suppose, is the point: if banks are bad at being banks, why do they have the exclusive right to the business?