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Journal Article
Nonbanks in the payments system: innovation, competition, and risk - a conference summary
From the early days of automated card sorting to the more recent times of the Internet and check imaging, payments and payments processing have continually embraced new technology. At the same time, the industry has been shaped by its share of entry and exit, through startups, mergers, and the reorganization of businesses seeking the proper scope of horizontal and vertical integration. ; These changes have enabled nonbank organizations to play a larger role in the payments system. Nonbanks have followed a number of pathways to more prominence: purchasing bank payment processing subsidiaries, ...
Working Paper
The supervisory framework surrounding nonbank participation in the U.S. retail payments system : an overview
Nonbank providers of payment services are important in the United States and appear to have become more prominent in recent years. This development, by itself, poses unique risks to the payments system. Associated with this change is a significant transformation in the mix of payment types away from checks and towards electronic payments, which introduces new risks to the payments system and potentially compounds the risks posed by increased reliance on nonbank providers of payment services. This paper reviews these recent developments in the retail payments system, discusses the associated ...
Working Paper
The importance of check-cashing businesses to the unbanked: racial/ethnic differences
The roughly 9.5 percent of all U.S. families that are without some type of transaction account (unbanked) are disproportionately represented by minorities. The unbanked often must rely on alternative ways to carry out basic financial transactions such as cashing payroll checks and paying bills. This study analyzes unique survey data and finds that a consumer's decision to patronize check-cashing businesses is jointly made with the decision to be unbanked. For the unbanked, these businesses are an important source for financial services. Attributes that contribute to these decisions, however, ...
Journal Article
Recent trends in the profitability of credit card banks
Competition among credit card issuers has increased sharply over the past few years. Despite this trend, the profitability of credit card banks not only remains high relative to the rest of the banking industry but continues to grow. This article examines recent trends in credit card bank profitability and, by looking beyond the aggregate data, uncovers some important differences between credit card banks owned by bank holding companies and those owned by nonbank firms.
Report
International Banking and Nonbank Financial Intermediation: Global Liquidity, Regulation, and Implications
Global liquidity flows are largely channeled through banks and nonbank financial institutions. The common drivers of global liquidity flows include monetary policy in advanced economies and risk conditions. At the same time, the sensitivities of liquidity flows to changes in these drivers differ across institutions and have been evolving over time. Microprudential regulation of banks plays a role, influencing leverage and capitalization, changing sensitivities to shocks, and also driving risk migration from banks to nonbank financial institutions. Risk sensitivities and flightiness of global ...
Working Paper
Banking and commerce: a liquidity approach
This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Adding a commercial firm makes it easier for a bank to dispose of assets seized in a loan default. This "internal market" increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a commercial firm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a nonbank bank in an ...