Recalibrating Abstract Payments Regulatory Policy: a Retrospective after the Dodd-Frank Act

Eniola Akindemowo, Thomas Jefferson School of Law

Abstract

The future efficiency of the payments system is at stake. Existing stored value products (SVPs e.g. gift cards and gift card apps) are early prototypes of what payments and money will become – digital, dis-intermediated, and possibly, neither state nor bank issued. These products have defied sustained efforts to pigeonhole them into traditional categories. Significantly, past regulatory efforts have thrown a startling fact into sharp relief: the relevance of deposits – the hallowed central concept of payments jurisprudence – is being undermined in SVPs and emergent payments. What this means is that the role of deposits – the lynch pin of much payments regulation and regulatory policy – is under question. Current pragmatic policy – even the very arrangement of the new Consumer Financial Protection chapter of the Dodd-Frank Act - concedes the deposit concept is no longer central to emergent payment methods. The question at the heart of this article is thus whether SVPs can and should be regulated differently for the sake of an effective, efficient payments system in the near future.

Though a comprehensive SVP policy does not presently exist, the U.S. need not concede its traditional position of leadership in the global payments arena just yet. Farsighted preparations for payments systems of the future have been underway in the E.U. and other regions for quite some time, but the U.S. may yet preserve its position of leadership - if steps are taken to address the regulatory flaw identified in this article now. This article recommends steps towards a far sighted change, suggesting a taxonomical approach to remedy the lack of an efficient, flexible regulatory approach.