Fintech in the U.S. is regulated at both state and federal levels. Each state and the federal government have their own laws for financial services, often with overlapping scopes of authority. Federal law generally takes precedence over state laws in cases of conflict; however, fintech matters where no specific federal law exists are subject to regulation by both levels of authority.(1)
Protecting consumers during a transaction is a concept conceived nearly 50 years ago. Lawmakers passed the Fair Credit Billing Act (FCBA) in 1974 to protect consumers against inaccurate or fraudulent credit card charges.(2) These government protections include the right for consumers to contest charges they feel are illegitimate or in error to receive a refund, known as a chargeback. Customers rely on chargebacks as a safety mechanism against credit card fraud, billing errors, and merchant misconduct. However, fintech payment methods like cryptocurrency and P2P do not offer chargeback protections like credit card transactions, which may delay the widespread adoption of some fintech payment methods.
Unlike traditional payment systems, where chargebacks can be initiated through banks or credit card companies, cryptocurrency transactions are irreversible by design. This poses a significant challenge for consumers seeking refunds or recourse in cases of fraudulent or disputed transactions, as the anonymity of cryptocurrency transactions makes it difficult to trace and identify the parties involved.
Similar to crypto fraud, P2P scams involve fraudulent transactions where a scammer convinces an individual to send money through a peer-to-peer payment platform, such as Venmo or PayPal, for a product or service that doesn’t exist or is never delivered. P2P transactions are generally not covered by the same protections as credit or debit card purchases, making it challenging to recover funds once they have been sent.(3)
For developers of emerging and alternative methods of payment, Eaton says much is needed to implement viable consumer protection solutions, and fintech companies should be leading the charge on creating these solutions. Fintech innovations have reshaped how businesses handle chargebacks, empowering them with advanced technologies, data-driven insights, and streamlined processes. Now, as the payments landscape evolves even further, it’s imperative for industry stakeholders to embrace these changes and leverage next-generation solutions to provide insight that helps mitigate losses, drive automation on otherwise unscalable processes, and ultimately achieve sustainable growth.
Eaton affirms, “At Chargebacks911, we support the transformative innovation in fintech—as our world evolves to champion convenience through new-age payment methods, we must evolve with it. New technology requires us to challenge legacy mindsets and expand protections. As an industry, we have a responsibility to set standards that protect customers using these breakthrough technologies.”
About Chargebacks911
Chargebacks911 is a global leader in chargeback management and remediation technology. As a provider and supplier to financial institutions and enterprise businesses, Chargebacks911 and Fi911 safeguard more than 2.4 billion transactions per year in 87 countries around the world. For details on Chargebacks911’s comprehensive dispute management solutions, visit https://chargebacks911.com.
References:‥
1. Global Legal Group. (n.d.). Fintech laws and regulations: USA: GLI. GLI – Global Legal Insights – International legal business solutions. globallegalinsights.com/practice-areas/fintech-laws-and-regulations/usa#:~:text=The%20Consumer%20Financial%20Protection%20Bureau,protection%20laws%20that%20impact%20Fintech
2. Kagan, J. (2023, June 19). Fair credit billing act (FCBA): How it protects consumers. Investopedia. investopedia.com/terms/f/fair-credit-billing-act-fcba.asp
3. How bad actors leverage payment apps to carry out P2P scams. Chargebacks911. (2023, February 17). chargebacks911.com/p2p-scams/#:~:text=Can%20you%20get%20your%20money,credit%20or%20debit%20card%20purchase
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