Finance

Visa to launch pay-by-bank payments, an alternative to credit cards

Published

1 month ago

September 5, 2024

Nurphoto | Nurphoto | Getty Images

Visa said it plans to launch a dedicated service for bank transfers, skipping credit cards and the traditional direct debit process.

Visa, which alongside Mastercard is one of the world’s largest card networks, said Thursday it plans to launch a dedicated service for account-to-account (A2A) payments in Europe next year.

Users will be able set up direct debits — transactions that take funds directly from your bank account — on merchants’ e-commerce stores with just a few clicks.

Visa said consumers will be able to monitor these payments more easily and raise any issues by clicking a button in their banking app, giving them a similar level of protection to when they use their cards.

The service should help people deal with problems like unauthorized auto-renewals of subscriptions, by making it easier for people to reverse direct debit transactions and get their money back, Visa said. It won’t initially apply its A2A service to things like TV streaming services, gym memberships and food boxes, Visa added, but this is planned for the future.

The product will initially launch in the U.K. in early 2025, with subsequent releases in the Nordic region and elsewhere in Europe later in 2025.

Direct debit headaches

The problem currently is that when a consumer sets up a payment for things like utility bills or childcare, they need to fill in a direct debit form.

But this offers consumers little control, as they have to share their bank details and personal information, which isn’t secure, and have limited control over the payment amount.

The open banking movement is inspiring consumers to ask who owns their banking data

Static direct debits, for example, require advance notice of any changes to the amount taken, meaning you have to either cancel the direct debit and set up a new one or carry out a one-off transfer.

With Visa A2A, consumers will be able to set up variable recurring payments (VRP), a new type of payment that allows people to make and manage recurring payments of varying amounts.

“We want to bring pay-by-bank methods into the 21st century and give consumers choice, peace of mind and a digital experience they know and love,” Mandy Lamb, Visa’s managing director for the U.K. and Ireland, said in a statement Thursday.

“That’s why we are collaborating with UK banks and open banking players, bringing our technology and years of experience in the payments card market to create an open system for A2A payments to thrive.”

Visa’s A2A product relies on a technology called open banking, which requires lenders to provide third-party fintechs with access to consumer banking data.

Open banking has gained popularity over the years, especially in Europe, thanks to regulatory reforms to the banking system.

The technology has enabled new payment services that can link directly to consumers’ bank accounts and authorize payments on their behalf — provided they’ve got permission.

In 2021, Visa acquired Tink, an open banking service, for 1.8 billion euros ($2 billion). The deal came on the heels of an abandoned bid from Visa to buy competing open banking firm Plaid.

Visa’s buyout of Tink was viewed as a way for it to get ahead of the threat from emerging fintechs building products that allow consumers — and merchants — to avoid paying its card transaction fees.

Merchants have long bemoaned Visa and Mastercard’s credit and debit card fees, accusing the companies of inflating so-called interchange fees and barring them from directing people to cheaper alternatives.

In March, the two companies reached a historic $30 billion settlement to reduce their interchange fees — which are taken out of a merchant’s bank account when a shopper uses their card to pay for something.

Visa didn’t share details on how it would monetize its A2A service. By giving merchants the option to bypass cards for payments, there’s a risk that Visa could potentially cannibalize its own card business.

For its part, Visa told CNBC it is and always has been focused on enabling the best ways for people to pay and get paid, whether that’s through a card or non-card transaction.

Finance

Biden administration forgives $4.5 million in student debt for 60,000 borrowers

Published

16 hours ago

October 18, 2024

Business Finance News

Borrowers who serve in the public service sector and government are eligible for this forgiveness. (iStock )

Another 60,000 student loan borrowers will receive student loan relief in the coming weeks. The Biden Administration announced $4.5 billion in relief for public service workers such as nurses, teachers and social workers.

The relief comes as a fix to the original Public Service Loan Forgiveness (PSLF) program. The program was initially signed into law by George W. Bush in 2007 to give non-profit and government employees loan forgiveness after 10 years in the workforce.

“Before President Biden and Vice President Harris entered the White House, the Public Service Loan Forgiveness program was so riddled by dysfunction that just 7,000 Americans ever qualified,” U.S. Secretary of Education Miguel Cardona said in the Education Department’s press release.

The new relief intends to pay down the loans of borrowers who were originally denied acceptance or who have still not received relief after making the 120 required monthly payments.

“Today’s announcement comes on top of the significant progress we’ve made for students and borrowers over the past three years,” President Joe Biden said in a statement.

“That includes approving debt cancelation for nearly 5 million Americans across all our various debt relief actions; providing the largest increases to the maximum Pell Grant award in over a decade; fixing Income-Driven Repayment so borrowers get the relief they earned; and holding colleges accountable for taking advantage of students and families,” Biden said.

If you have private student loans, federal relief doesn’t apply to you, unfortunately. If you’re looking to lower monthly payments and ease the burden of student loan debt, consider refinancing. See what your interest rate could be via the online marketplace Credible.

IS COLLEGE DEBT WORTH IT?

Resources available for students affected by the recent hurricanes

Hurricanes Helene and Milton have wreaked havoc on many communities in the south, causing serious physical damage and severely disrupting educational services. In response, the U.S. Department of Education released resources to help students and institutions of higher education recover.

“I have directed our team at the Department of Education to leverage every possible resource available to meet the needs of impacted students, families and school communities,” Cardona said.

The new resources include support for recovery needs like mental health care for students and educators, technical assistance and flexible financial aid policies at affected universities. Many students are also automatically being enrolled in natural disaster forbearance, so they don’t have to worry about their loans while recovering from the hurricanes.

Most of these resources will be concentrated on Georgia, which has seen a substantial amount of damage. The Readiness and Emergency Management for Schools Technical Assistance Center is a specific program Georgians have access to. It helps education agencies manage their safety, security and emergency management programs.

The Early Childhood Technical Assistance Center is another option that offers resources and links from organizations that help families and children, including those with disabilities, cope with disasters.

If you don’t have federal student loans that qualify for assistance, refinancing could cut your monthly payment. You can use Credible to compare student loan refinancing rates from multiple private lenders all at once without affecting your credit score.

STUDENT LOAN DEBT HAS INCREASED BY 430% SINCE 2003 – HERE’S HOW TO LOWER YOUR DEBT

$70 million in federal funding going to schools for additional mental health services

Along with aid to student loan borrowers and students affected by natural disasters, the Biden administration is also directing federal funding towards mental health services in K-12 schools. The administration announced a $70 million investment that will expand students’ access to mental health support.

“We know that students are more likely to access mental health support if it’s offered in schools, and our educators and school communities are on the front lines when a student is struggling,” Cardona said in the announcement.

“The need for mental health support in our schools remains high,” Cardona said. “Today’s announcement of an additional $70 million will allow more institutions and schools to train and hire mental health professionals – especially in underserved communities – ensuring that every student has access to the care they need to thrive.”

The new funding, combined with the Bipartisan Safer Communities Act (BSCA) investments, will go to 333 grantees across 48 states. It will help communities train and hire 4,000 more mental health professionals across the country.

To see what you’d pay on a private student loan, you can visit Credible today to view a rates table that allows you to compare fixed and variable rates from multiple lenders.

LESS THAN A THIRD OF AMERICANS APPROVE OF HOW BIDEN HAS HANDLED STUDENT LOAN DEBT

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