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FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies.
For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops.
Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.
Introduction
Attitude of the country towards modern payment services
The social and political climate for modern payment services has been positive, with American consumers, particularly the younger generations, eager to adopt the added conveniences of the latest payment innovations. Interest in virtual currencies continues to grow. State and federal policymakers continue to look at the modern payment industry with an eye towards the prevention of money-laundering and terrorist financing and consumer protection.
Americans are becoming increasingly comfortable using digital payment systems. According to a study by McKinsey and Co. in 2021, 82% of Americans made a digital payment, defined as browser-based or in-app online purchases, in-store checkout using a mobile phone and/or QR code. This compares with only 72% five (5) years ago.
Americans are still using cash with diminishing frequency, with total cash transactions dropping from about 30% in 2017 to about 19% in 2020. According to the 2021 Findings from the Diary of Consumer Payment Choice conducted by the Federal Reserve Bank of San Francisco, the COVID-19 pandemic has rapidly accelerated this trend of fewer cash transactions.
The use of crypto currency in the United States, though primarily as an investment and not as a means of payment, has rapidly expanded in the last year. In 2021, almost 20% of respondents to the McKinsey survey reported holding or having held crypto assets up from only 6% in 2020. These statistics reflect that the ownership and use of crypto currency in the United States may continue to increase.
Legal affairs
Obligations and requirements to provide payment services or ancillary services described above
In the United States, payment services are regulated at both the state and federal level. Under federal law, an entity providing payment services may be required to register with the Financial Crimes Enforcement Network (FinCEN), the bureau of the U.S. Treasury Department that enforces federal regulation of money service businesses in the United States. Money service businesses (MSBs) serve a large segment of the “unbanked” or “self-banked” population and provide services like check cashing, money transfer, prepaid stored value cards, money orders and travellers cheques. FinCEN regulates MSBs pursuant to the legislative framework commonly referred to as the Bank Secrecy Act (BSA), which includes elements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA Patriot Act) and other pieces of legislation. The primary consequence of this regulation is that MSBs must put in place and enforce anti-money laundering (AML) and know-your-customer (KYC) policies designed to aid FinCEN’s investigation of potential criminal activity.
As noted above, payment-related activities are regulated under federal and state laws and regulations. The primary regulators with rulemaking authority over payment services include the Consumer Financial Protection Bureau (CFPB), the Federal Reserve and stat