Nadia Dombrowski, SVP, General Counsel & Corporate Secretary, Community Federal Savings Bank
How did you initially get involved in this practice area?
I originally got involved with payments when I moved in-house to GE Capital from Rogers & Wells, where I had spent the first decade of my practice working on M&A deals of publicly and privately traded companies. At GE Retailer Financial Services, I had my first exposure to payments networks and their varying rules; interchange guidelines and pricing mechanisms; regulatory drivers and guideposts; marketing and branding techniques and concerns; and the importance of having a distinct and important value proposition in a competitive landscape. I worked with a strong legal and compliance team there, that worked equally closely with the business leadership across all functions. It was a pivotal and influential role, because it illustrated to me the benefit that a highly functioning Legal & Compliance function could have when partnering closely with the business, in a fast-paced and competitive landscape.
From GE, I went on to other general counsel, compliance, risk and operational roles with leadership and partnership opportunities related to Payments, each of which further enhanced and supported my understanding of the sector, from the network, issuing bank, law firm, and fintech disruptor and regulatory perspectives. From each of these positions, I had an opportunity to learn and dive into new issues presenting themselves in this fast-moving and increasingly complicated space.
Tell us why you love this area of the law?
This area of law is fun, exciting, and interesting because simplifying; demystifying; lessening the complexity of; or reducing the individual expense of payments benefits most all stakeholders in the payments ecosystem and removes barriers for businesses and individuals in overarchingly positive ways. For businesses, payments are the life’s blood of their successful operation. A failed inbound or outbound business payment means a negative customer experience; missed opportunity to focus on good work product or otherwise extraordinary service; and a blemished brand dilutive to loyalty. For many of us, it’s the activity, the product, the experience, or the event that is being paid for that is the most important aspect to retain or memorialize. The payment itself, while necessary and important, is ancillary in our minds, but for the fact that we all want the security, reliability, and dependability of a strong and inexpensive payment system. This sector deals with these tensions from consumer and business perspectives while i) challenging and adjusting the age-old paradigms and framework of banking; ii) developing and creating products and services in regulatory schemas not exactly fit-for-purpose; and iii) as a result, bringing people and businesses across an increasingly smaller world closer together, by enabling greater and easier transmissions of funds and currencies, in a safe, prudent and productive manner. Mastering all of these aspects on a daily basis is, alternatingly, daunting and invigorating.
What are the most interesting developments in the financial services sector for eCommerce online and offline payments?
While there exist many noteworthy developments in Payments, some of the most interesting are with regard to i) developing easier and cheaper cross-border payments (dealing with multiple currencies, cryptocurrencies, numerous jurisdictional requirements, and payments of various methods); ii) increasing facility in the business-to-business (B2B) payments arena; and iii) multipayment integration. Omni channel payments is also interesting for businesses and customers alike, as both sides of the transaction will benefit if online and offline payments are integrated and covered, thus enabling merchants to reach customers everywhere. Finally, it will be important to monitor ongoing litigation against the progress of fintech companies’ interests in applying for a national bank charter with the Office of the Comptroller of the Currency (OCC). Depending on developments in this area, it’s possible that Payments will see more partnerships between standard players in the financial services industry and the Fintechs.
What are the risks currently facing technology companies regarding payments?
The risks currently facing technology companies are often quite akin to those the traditional players partnering with them also face. In particular, risks are mounting in relation to fraud; cybersecurity; technical integration; and customer service and support. One of the key benefits provided by fintech payment providers is related to reduced costs achieved through technology, with those reduced costs (often coupled with increased flexibility and facility to pay) being passed along to the consumer or end-user. While generally beneficial to the ecosystem in terms of increased breadth and reach, as well as utility, these reduced costs increase the pressure of maintaining profitability against the costs related to fraud mitigation exercises and tools; adequate cybersecurity protection and insurance; and the costs related to addressing customer complaints and concerns in a heavily regulated environment. These risks, together with the hurdles posed by seamless integration of systems and platforms, will be important ones to monitor and strategize around for the future success of traditional and non-traditional players, partnering in Payments.
What are the next steps in the development of federal and state regulations in payments?
Round the clock real-time payment and settlement services will be an important development for fintechs and their partners, as the regulators endorse faster payment services thereby enabling near-instantaneous transfer of funds, irrespective of time of day and day of the week. No doubt, this development will have economic potential for both businesses and individual consumers, allowing them greater flexibility regarding the management of their money and while making time-sensitive payments. The Federal Reserve will be interested in developing guidelines for this service that protect all the stakeholders in the payment system and the functioning of the broader U.S. payment system.
There will likely also be developments in the US privacy framework that will inevitably follow in the footsteps of those in the EU, where increased scrutiny, monitoring and diligence of the financial services companies gathering and utilizing data will be of utmost importance.