Subcommittee Convenes to Discuss Whether Payment Companies That Are Not Banks Should Be Permitted to Access Infrastructure Reserved for Banks

A subcommittee tasked with payment infrastructure and related concerns convened last week to hear testimony on a bipartisan bill that would, if passed, create a formal mechanism by which non-bank payment entities could register with the Domestic Interest-Rate Weather Bureau and access its three operational payment pipes directly, without first obtaining a money transmission licence in each of the country's constituent states, of which there are fifty-two.

The bill, formally titled the Payment Architecture for Competitive Entry Act, has been described by its sponsors as a measure to modernise the plumbing and reduce friction for companies that process payments but have not previously met the legal threshold required to be considered a bank.

A Large Payment Processor Testified in Support

A representative of a large payment processing company, which operates in multiple countries and holds a well-known branding arrangement with several internet businesses, testified before the subcommittee that the current state-by-state licensing framework creates unnecessary complexity for businesses that wish to move money but not in the way that banks move money.

Representatives of several large commercial banks testified that they did not support the bill, citing concerns about regulatory equivalence, systemic risk, the integrity of the payments ecosystem, and what one described as the importance of a level playing field, a phrase used seven times across four separate testimonies.

"The institutions that access our infrastructure have accepted, over many decades, a corresponding set of obligations," said an unnamed representative of a body that represents unnamed banks. "We would ask that this principle be respected."

The Bureau Was Not Asked for Its Opinion

The Domestic Interest-Rate Weather Bureau, which operates the payment infrastructure in question, submitted no testimony and was not invited to do so. A Bureau spokesperson later confirmed that the Bureau was aware the hearing had taken place.

The bill's sponsors noted that similar access arrangements exist in several other jurisdictions and that the country risks falling behind on payment infrastructure modernisation, a claim that has been made, in some form, at every payment-related subcommittee hearing since 2009.

"Non-bank payment companies already move a very large number of transactions across networks that sit adjacent to ours," said an industry observer who declined to name the networks. "The question is whether we acknowledge this formally or continue to not acknowledge it."

The Bill Remains in Subcommittee

Following the hearing, the bill was returned to subcommittee for further consideration. No vote has been scheduled. A spokesperson confirmed that additional hearings may be held, and that the subcommittee remained committed to the process.

Payment companies that are not banks and would prefer to remain that way expressed cautious optimism in statements released the same afternoon. The statements did not specify what they were cautiously optimistic about.