Transcripts For CSPAN2 Hearing On Mobile Payment Technology 20200211

representatives of paypal, consumer reports and the u.s. faster payments council testified at the hearing. >> the task force welcomed order. good morning. as authentically recess of committee at any time and without objection members of the full committee not on this test for authorized to participate in today's hearing consistent with committee practice. without objection donald payne of new jersey may also participate in today's hearing of recognized by the tray to question witnesses under the five-minute rule salons on the subcommittee who are present have been recognized for that round of questioning. this hearing is entitled is cash still king? redoing the rise of mobile payments. i now recognize myself for foreign minister given opening statement. again, welcome everyone to good morning and thank you for attending this hearing of the task force, and thank you for joining us today. we are here to discuss the future payments in america over the past few years we have head anecdotal but growing evidence that retailers and consumers are moving toward a cashless society. society where consumers don't carry cash and retailers don't accept it instead using either plastic or mobile forms of payment. a truly cashless future is that imminent but the rights of non-cash payments israel and today's conversation is to our committee better understand the implications of that rise for financial inclusion, consumer privacy and calls to both business and consumers. new payment methods, speedup transactions. if consumers give more control of their money and make operating a business cheaper and safer. the consumer can swipe a card or tap the phone instead of making change at the register. that transaction is then instantaneously documented with their financial institution. automatically advocate to allege which track spending and available balances and the business gets to avoid the time and expense of accounting or safely storing and moving physical currency. they use physical cash is still a a major part of our retail economy. research shows cash payment make up 42% of transactions under $25 and 49% of transactions under ten dollars. these transactions disproportionally involve disadvantage and working-class americans. cashless payments typically require consumers have access to a bank account to back the payment method. despite improvements the most recent fdic survey showed roughly 14 million adults, , 6.% of america's households, lack bank account access. we don't sell the pump of banking access before transition to a cashless society, we were preventing families across the country from accessing many of the basic goods and services they need to survive. further, high-profile data breaches have been oregano fiction in the news over the past few years. this has left consumers rightly concerned about the security of the financial data. cash transactions involve involving no consumer data being collected while on cash payments require at least some data to be exchanged. more than a a quarter of all malware attacks in 2018 2018 we directed at banks and financial organizations as the amount of personally identifiable information stored by financial services firm grows, will continue to rise in attacks on these groups and while a financial institution continue to combat these attacks, , some consumers choose to manage their finances in cash or a cashless future would not do these americans that choice. we need to continue to promote innovation and payment technology, collusion and security. i hope today's hearing will focus on the way we can develop our payment system to reflect these needs. the ubiquity mobile payments is on the rise and europe, asia and our competitors. there will also continue to build their own technology. we must learn from their experience and focus on meeting the needs of all our consumers here at home. i look for to today's discussion and hearing from our witnesses. with that i know recognize my friend and the new ranking member for an opening statement of five minutes. >> thank you, mr. chairman. and thank you for convening this meeting on mobile payments. i want to take a moment to acknowledge many of the concerns that some of our witnesses will offer in their testimony, and some of what you just shared. their serious public policy challenges to address and i look forward to working through them with you and everybody on this committee. however, i may differ in town today because i would like to look at the many positive changes and innovations we have to give mobile payments. we have tremendous innovation occurring in the mobile payment space. the term mobile payments is so broad that even fails to capture all the improvements in ease and convenience of payment as well as the growing methods of payment. we can't be afraid of innovation in change. ignoring or even suppressing innovation will not make it go away. innovation can actually be a key driver in lowering cost individuals and creating new ways to enhance consumer protection. we have so many to pay today using our digital devices. this past holiday season americans spent more than $50 billion just using their phones. apple pay, then no, square cash and even bitcoin on a household names. some of the most successful mobile payment applications include uber and lyft. or i can open my favorite merchant mobile app and select items to purchase, see what coupons and report are available and in one click pay for my items. this hearing is titled is cash still king? will be differing opinions among our witnesses and among task force members, is this really the right question to ask? regardless of the dominant form of payment should we be asking how can we make access to commerce easier and more fair? how do we ensure financial inclusion in an evolving world? -new forms of payment facilitate access to services and uplift struggling americans? cash is undoubtedly still with us and it will remain that way for the foreseeable future but this is the financial technology task force and i hope we spend some time trying to learn about and better understand the changes taking place in our society. i hope we discuss ways that mobile payments can include everyone and enable access to capital and financial services in ways that were previously impossible. i would also like to acknowledge the former ranking member for his efforts in this space. he led a letter to the federal reserve supporting further research into the concept of a digital dollar. this concept could both speedup transactions and provide convenient for consumers but it can also extend access to those previously excluded and help bring more people into our increasingly digital world. an advance i think the witnesses for their time and insight on these topics and i look forward to the discussion today. i yield back. >> that chair recognizes mr. scott from georgia for one minute. >> thank you, very much, chairman. i look forward to today's hearing on financial inclusion come how we can work with that, on a payments innovation can improve access and convenience for under bank customers. also security in our financial system and how an increase in online transactions impact transparency and fraud. also, mr. chairman, our task force has been critically engaged in the way of cutting edge technology, in the ways cutting edge technology can benefit consumers and small businesses. i look forward to our distinguished panelists, and thank you mr. chairman. >> the gentleman yields. so today we welcome the testimony of a distinguished and accomplished panel of witnesses. ms. deyanira del rio, the coexecutive director of the new economy project, and rotation built to support committee controlled development and produce safe and healthy communities. mr. usman ahmed, paypal, leading company in digital payments, technology and owner of the peer-to-peer payments company venmo and i used to continue to send money to my daughter in college in north carolina. she appreciate your service. mr. aaron kleinfeld and economic studies and policy director for the center on regulation and markets of the brookings institution. mr. klein has also served as deputy assistant secretary for economic policy at the treasury department and is the chief economist for the senate banking committee. ms. christina tetreault -- is at right? okay, thank you. christina tetreault, senior policy council at consumer reports a nonprofit consistency of policy and legal experts advocate for proconsumer policies and financial services. and ms. kim ford, executive director of the u.s. faster payments council, and workstation that organizes the u.s. payment system. i think you'll for being here for helping the committee with its work. witnesses are reminded your oral testimony would be limited to five minutes so without objection to written statements will be made part of the record. ms. del rio, you are recognized for five minutes to give an oral presentation of your testimony. >> thank you, chairman lynch and ranking member emmer and members of the task force of financial technology. thank you for the invitation to testify at today's hearing. either on behalf of bake on a a project and economic justice center in new york city that for more than 25 years has worked with low income new yorkers and committee based organizations to challenge systemic discrimination and a financial system and to advance fair lending, financial inclusion as a matter of racial justice and to ensure the tools are available for equitable neighborhood development. i'm pleased to share our perspective on some of the issues being discussed at today's hearing focusing on bank redlining and continued impediments to make it assess for two americans and people as well as the growth of cashless businesses and disparities in financial service access as they play out in low income neighborhoods and immunities of color. i have attached to testimony several maps that's just a bit of the landscape in new york city and show the vast disparities in terms of where bank branches even locate based on the racial cup position of neighborhoods. you will see that on the map they show that are fewer than one bank branch per 10,000 residents in communities that are predominately black or latino. that compares to 3.5 branches in predominately white neighborhoods. it's just one indicator that shows the different financial services landscape that people encounter in their daily lives, that old in new york city but throughout the country where those patterns plant consistently. i want to emphasize a few things in my purple testimony. when his issues addressed in today's hearing we believe are systemic in nature and deeply entrenched. they call for bold systemic solutions including strong regulation. too often discussions about financial access disparities including the use of cash versus credit or debit focus on choices are behaviors of individuals or on the need to design so-called alternative products, rather than on addressing the continued structural barriers the block millions of people including poor people, emigrants, low-wage workers and many others from accessing mainstream and strongly regulated institutions, products and systems. as this committee knows, there are multiple impediments and some of them include the high cost of maintaining bank accounts and persistent redlining as i mentioned and prohibited identification requirements which all create real barriers to entry for millions of people. through our legal assistance hotline which assist thousands every year, we have seen a very clear and growing pattern of mainstream banks pushing low income people out of the banking system and out of regulated services in myriad ways. one example is the way that banks typically will close peoples accounts if the experience fraud or at the end of the month if they have incurred high or hidden overdraft fees and are unable to pay those fees back which control in the hundreds of dollars. that only two banks close accounts in those instances but the report those customers information to chexsystems and other consumer reporting databases shared by the banks and it effectively blacklists people from opening accounts elsewhere. so the conversation about access to finance and now that can facilitate payments needs to look at some of the continued predatory practices in our system. i want to point out a few things. one is what we believe eliminating barriers to access are important, at the same time we have to recognize financial products and technology are not a solution to these deeply systemic problems. they are not solving poverty. we see too often that we hear industry and policymakers tout different products and services as being the solution to deeply entrenched problems that require bolder solutions. we also believe we must challenge the rhetoric and the sort of alleged benefits around financial innovation and fintech which inexpensive low income people just simply fail to match reality too often. for decades companies have invoked innovation as as a smokescreen to evade strong regulation and to peddle inferior high cost or even outright predatory products from subprime lending to payday loans to fee riddled prepaid debit cards and payable cards that are often marketed to low-wage workers or employers force workers to receive the payments on come essentially transferring the cost of managing payroll from the employer to the low-wage worker. i just want to emphasize that it's very broad and is used in many ways. can refer to a range of companies and technologies. we recognize appropriate and safe technology can of course benefit people but too often we see these companies claiming to be eliminating banking deserts and supporting an apparent communities when they're in fact, perpetuating segregation in our banking system. one example is how companies in europe are routinely seeking to circumvent stronger consumer protection laws including our states user loss which have kept up payday and other exploitative use every lending from our state. the administration's efforts currently to exempt fintech company some critical consumer protection rules only exacerbate the serious risk. thank you so much for time and on the 42 addressing the other topics during the q&a. >> thank you, ms. del rio. mr. ahmed, you are recognized for five minutes. >> chairman lynch, ranking member emmer, chairwoman waters, ranking member mchenry and members of the task force. i would like to thank you all for giving paypal the opportunity testify today on different topic of mobile payments. since 1998 paypal has been at the forefront of mobile payments. paypal operates in open secure and technology agnostic digital payment platforms they give are over 300 million active account holders the confidence to connect and transact in new and powerful ways whether their online, in app or in person. to a combination of technological innovation and strategic partnerships, paypal treats better ways to manage one's money to offer people and businesses choice and flexibility when the sin and receive payments. why the sending and receiving money with friends and family through apps like paypal, venmo and zoom or engaging e-commerce more and more people are using their smartphones to make purchases, receive payments and manage their accounts. our technology is giving more people and businesses access to the global market. and the ability is financial services tailored to their specific needs. the mobile phone has strayed from nearly every aspect of our lives. we use to communicate with friends and family, watch our favorite shows, order a cut, change of temperature at home and engage in payments. the growth of smartphones over the past decade has been incredible. in 2011 only 35% of americans have access to a smart phone. percentage grew to 81% by 2019. at paypal we've witnessed how how the rise of mobile devices has transformed payments. in q4 of 219, a 44% 44% of the $199 billion of total payment volume with process was made on a mobile device. the advancement of mobile payments has important implications for unbanked, under bank and financially unhealthy individuals and communities. for example, giving people access to money instantly via mobile device can help in reducing fees and late payments. sending remittances is about half the cost of a traditional remittance and can save over an hour of time for both the sender and the receiver. mobile payments can provide a baseline for credit underwriting which can enable consumer finance during cash flow challenges. mobile payments can also benefit small businesses due to the lower costs of acceptance as well as payments data being leveraged to up fill the gap in small business working capital, in particular for women and minority-owned businesses. security has been front and center throughout the development of mobile payments leading to the adoption of tokenization which reduces number of entities that have access to sensitive financial data. paypal is a pioneer of tokenization technology. tokenization substitutes sensitive financial information with a series of nonsensitive numbers that confirm a business -- that confirm to a business that a payment is authentic but minimizes the likelihood of data breaches and reduces fraud. mobile payments information is sensitive and paypal leverages payments data for fraud reduction and service improvement. cash is a ubiquitous form of payment. while it may appear costless to transfer, there are costs associated with cash. cash is deeply implicated in tax evasion which cost the u.s. that are covered some $500 billion a year in revenue. when mexican drug lord l chappell was arrested there was more than $200 million in cash found on the premises and the global drug trade is estimated at $600 billion. and finally 20% upon bank into his report having cash lost or stolen. in a study about income income los angeles area households, the finding was the average unbanked consumer lost the equivalent of nearly two weeks of household expenses when cash was lost or stolen. mobile payments presents a tremendous opportunity to reduce many of these costs associated with cash. while we don't predict the death of cash in the next decade or two, and we believe that consumers should have choice in what payment options they choose, at paypal where working diligently to make sure the value proposition of digital payments vastly exceeds the value proposition of cash. for every member of society. thank you again for the opportunity to address the task force on this important and timely topic and i look for to answering any questions. >> thank you, mr. ahmed. mr. klein you corrected for five minutes. >> thank you chairman lynch, ranking member emmer, john waters, ranking member mchenry, members of the task force for the opportunity to testify on the critically important issue of the future of cash and the rise of digital wallets. let me start by answering the question the hearing poses, yes, cash is still king. in fact, cash is used by a diverse set of people who defy traditional political or geographic boundaries. false narratives abound that cash is dying or cashless society around the future were mulling is to use cash perkins act millennials and the grandparents have cash in common. both generations use more than those between ages 30 and 60. in a sample of mostly small business transactions, iowa and wisconsin, two of them are cash intensive states have a lot more in common with the bronx in staten island. while utah and virginia two of the more card intensive states are much more similar to brooklyn and manhattan. nationally, racial minorities and wrote americans both use cash or quickly that has been stay cash is most commonly people pay for things under $25. while cash is talking there's no denying increasingly large number of goods and services are moving onto digital payment platforms that do not accept cash. as they come digitizes, those without access to low-cost reliable digital payments are increasingly unable to participate and share in the benefits. prior concerned that the digital divide were centered around the question of access your smartphones have successfully bridged this divide. however, online access alone is insufficient without a means to purchase the goods or services being offered the benefits of the -- fail to convey. access to digital payments has become the new digital divide. online and at the base goods and services lower costs from anything from ordering groceries to hailing a cab. the economics of many digital services simply assume users will always have funds to cover recurring or periodic expenses and expect the ability to tap into a consumers bank account to get paid. given high cost of overdraft fees, growing income volatility are nations at the nexus going slow payment system, the reality for people living paycheck to paycheck is a far more expensive system than for those on the other side of the divide. for consumers who truly benefit from the digital economy cheap and reliable digital payments are necessary. it entered into existing system provides them freely with money and charges a lot to those without. it may require government policy and resources and strong rules to fix this problem. a corollary to the policy that businesses continue to accept cash is that consumers have access to digital payments and that needs to be facilitated. my written testimony goes into significant detail regarding the high and often hidden costs of existing banking products like overdraft fees that great at effectively different cost structure for people living paycheck to paycheck. it highlights multiple policies to solve some of these problems and reduce the demand for expensive ways to access cash like check cashing. the key is to require immediate funds available for consumers which most of the rest of the world developed decades ago through real-time payments. waiting for the federal reserve to follow through on its investment to build a system sometime this decade is not enough. policymakers can solve this problem today if they wanted to buy regulation or legislation. in fact, tomorrow is the 31st. a lot of people would get paid that day and will struggle to come up with the amount of money available in the bank account to make their payments on the first of the month the next day. i want to conclude by noting that america once led the world in payment technology. 50 years ago america pioneered the new payment technology that would come to dominate the world, magnetic stripe plastic cards but technology alone was not enough. it required robust consumer protection legislation from congress such as electronic funds transfer act to successfully create and a private where cards flourished. today, china has leapfrogged cards. china's nooses is built on digital wallets, car bodes -- barcodes and register on big tech firms. it has differences between merchants, consumers and payment system providers. it challenges the long stint placement of payments on the side of making as opposed to commerce. china's system is unlikely to catch on in america precisely because it is more efficient because it does not take large sums of money for merchants at the register, and will not be able to compete with the growing height in credit cards that come to line america's wealthy with thousands of tax-free dollars in rewards. ironically the innovations in america's payment system that is turned into a reverse robin hood that contributes income inequality wedlock adoption of alternative technology. this committee is wise to consider the rise of mobile wallets and policymakers to devote more time and attention and resources to figure how to great a more fair, efficient and inclusive payment system. i think the chair and ranking member and the rest of the task force and look forward to your questions. >> thank you, mr. klein. ms. tetreault you are now recognized for five minutes. >> chairwoman waters, ranking member mchenry, members of financial technology task force, thank you for the opportunity to be here today. i am christina tetreault. we are an expert independent nonprofit organization whose mission is to work for a fair, safe and just marketplace for all. my cr colleague susan martindale testified before this committee in 2012 regarding the future of money in the rise of mobile payments. she noted that consumer privacy and -- consumer privacy concerns inhibited mobile payments adoption and that fragmentation and payments law creates uncertainty for consumers. eight years later i will make these same points today. american adoption of mobile payments continues to lag that of other countries. americans still love cash and as compared to mobile they love card. >> and spoke to note that mobile is a platform and not a new payment type. to meet them modern and your mobile things that mostly technology built in the early 1970s. new payments including faster payments and crypto currency are in the case of faster payments or should be in the case of crypto currency covered by existing laws. unfortunately, payments law is an irrational mess. under current law, credit card holders have the strongest protection. that the card bank transfer and prepaid accounts have weaker protections. gift cards and direct to kerry billy have almost none. congress can fix the massive payment lovemaking anyway safe to pay. they can do this by establishing a strong uniform protection for all non-cash, not check payments. when it comes to mobile payments unfortunately consumers do not understand the rights and obligations. when we asked a focus group of mobile payments users what they thought would happen if something went wrong with the payment, they uniformly said they expected the company whose name was on the app or wallet would fix the problem and make them whole. this is not necessarily the case. in some instances users may, in fact, be obligated to contact the bank or card issuer for help. other problems outside the scope of current law. for example, when you consume is tricked into sending money to a scammer, they will find these transactions have essentially the same level of protection as cash. many claims have been made about how mobile will increase financial inclusion. the reality is quite different. americans without checking and savings accounts are less likely than bank consumers to use mobile payments and are far more cash relying that other americans. unbanked consumers are more likely to suspend or cancel their cell service because of cost of maintaining coverage, making regular use mobile financial services nearly impossible. no app fixes a structural issues that blocked locked out to many americans. crypto currency has also been proposed as a fix for financial inclusion. if the legal mess and crypto currency is worth. the few consumer protections that crypto currency payments have are largely found in state money transmitter laws and are seriously lacking. crypto currency and for that matter any emerging financial service should not be tested on consumers with the least cushion in the financial life. the best way to ensure consumer access to faster and safer electronic payments is to support the federal reserve proposal to build the faster payment system and not by empowering untested unregulated corporate schemes such as facebook's libre. there is another shadow over multi-famous. the crew protection for mobile payments made with stored value example the money held in venmo accounts are threatened by the paypal lawsuits seeking to invalidate the cfpb prepaid role. before the role consumers had to rely on the inadequate protections provided by state money transmitter laws. billions of dollars in millions of consumer accounts are at risk if this rule is invalidated. privacy consumers exist alongside concerns in mobile payments. while mobile payments and even some additional financial services are free to consumers, users are not the customers of the services. they are the product. the potential for uses information to be weaponized is particularly acute when payments are combined with platforms. need strong privacy legislation that creates a federal floor a protections, law the records dated minimization, clear information about provider practices and strong data security standards. this law must have big risk enforcement tools and tools to ensure accountability. i thank you for the opportunity to get today and i look forward it to. >> thank you. ms. ford, you are now recognized for five minutes. >> glcm chairman lynch, ranking member emmer and distinguished members of the task force. thank you for the invitation to appear today. my name is kim ford and i'm executive director of the u.s. faster payments council. we are membership organization that is leading the industry effort to modernize the u.s. payment system. we were formed from the work of the federal reserve after payment task force which by the industry together to start to figure out how to make the u.s. payment system faster, or secure and more efficient. i'm grateful for the opportunity to be with you today as we examine consumers payment preferences and look to what the future may hold of u.s. payment system as a result. as you know the payments landscape is in the midst of unprecedented change when i entered this entered this industry in 2000 for the headline at the timeless checks which is starting to lose ground to debit and credit cards. and now we're talking about things like mobile payments, biometrics, machine learning, artificial artificial intelligence, crypto currency and more. clearly we have transitioned in this country from an environment dominated by paper checks and cash to one dominated by electronic payments. we are seeing cash is being used less and less for some of the major payment categories it once led. for example, historically cash has been used for low value payments below $25 we are seeing card use grow in this area as well. as we think about why that is, to themes come across most clearly. consumers desire for convenience and consumers desire for security. take electronic payment cards. they are accepted and retailers across the globe, enable tracking of transactions, provide budgeting options and provide consumers with protections against loss and fraud. but cash may also be convenient, easy to carry and widely accepted, it can be easily lost or stolen as are no measures in place for consumers to recoup such funds. for these reasons among others electronic payments have climbed the ranks to become a preferred payment option for u.s. consumers. moreover,, as americans incorporate their smart phones and to some aspects of the lights, they expect that on-demand functionality to extend to other transact with their friends, family, businesses, employers and even the government. this is translated to increase in the use of smartphones for things like internet banking, e-commerce transactions, and the use of mobile payment apps. one study reported over the last three years of their consumer payment research survey respondents consistently rated the most attractive features of mobile payments as, one, the ability to stop a fraudulent transaction, two, instantly view the transactions, and three, the ability to use the photo turned a payment card on or off to prevent unauthorized usage. these findings underscore so many americans increasing lines on electronic payment to solve for convenience and added security. but, of course, the popularity of mobile phones and access to the internet are not enough to increase financial inclusion. certainly it is appropriate to ensure people can benefit from digital financial services. this requires a well-developed payment system, reliable and accessible infrastructure and a robust regulatory framework with consumer protections and safeguards. while we have a completely solved -- haven't completely solved axes, financial inclusion is getting better. due in part to new types of financial services at our access to mobile phones and the internet. challenging our system to be that it is a limited two plastic cards and mobile phones. at the fpc we believe the next evolution of our payment system is a more real-time, safe and efficient system that anyone can access at any time, anyhow and anywhere. we believe faster payments have the potential to build on the benefits of current electronic payment mechanisms and further improve money management, minimize the risk and encourage global competitiveness. our members believe it's a much they created an organization to bring all the payment industry stakeholder segments together to identify barriers to faster payments adoption and then work shoulder to shoulder to solve those problems. for example, we are examining the regulatory landscape of faster payments, studying fraud best practices and trends, promoting transparency for consumer and business end-users, assessing directory models in helping our members understand how to develop into the faster payment strategy. yes, we support electronic payments. we also support and a private which payment choice is preserved whether that be paying with cash, writing a check, sending a wire or using a credit debit or prepaid card. i'm also proud of the fact that we are demonstrating that it is possible to get a widely diverse group of industry takeovers together represent consumer groups, merchants, tech providers can financial institutions and more to tackle complex problems and a fair, inclusive and transparent manner with an integral which we all agree which is driving universal access to it after payment system that delivers a high quality and secure user experience for all. thank you for the opportunity to present to you and i look for your questions. >> thank you, this four. i killed myself five minutes for questions. mr. klein, you illustrate a good point where if you look at young people and their consumer preferences, our two girls i don't think i've ever been in a bank except for maybe getting travelers checks or something like that, probably less than five times in a lifetime, compared to how i grew up what i did you go down or stand. this is a trend that is really overtaking us, and so, and it is being driven by consumer preference. it's not some, i don't think it's necessarily some diabolical plan. i think it's just easier for people what to do it. the problem is that not everybody has that opportunity. you have had an interesting background in terms of looking at international payment systems and things like that. are there models out there that would sort of address what we are trying to at? we know it's much cheaper and in many ways more efficient and safer, in some instances here either systems out that do a better job than we have right now in terms of the payment system that are out there? >> chairman lynch, it pains me to say this but china's system is much more efficient, much faster, and has reached a level of the universal adoption that is somewhat mind-boggling. you have two services the start of less than five years ago and they each have a billion monthly users. they were able to do it in part one of the fascinating things about the chinese experience is this this is a country that had by some estimates 7 million debit cards, but only 20 million to 40 million card readers. you could not take a card, gore ran china and try to do something with your magnetic stripe card. a look at you like it from a century ago. it's all on phones and digital wallets. the problems with the chinese system, i'm not advocating that we move there, particularly because of some of the commercial concerns involved in bringing the banking system, the payment system outside of banking, and our legal and regulatory framework completely assumes that payments are part of banking system, as ms. tetreault pointed out everything is tied to this being in banking. when you legally look at the cliff between banking and commerce in the united states the stuffing that ties payments onto the banking side. >> thank you. and ms. tetreault i want to ask you, anna, we raised the china model. so right now if banking goes away of the internet, whether just collect all of our information, not on what you need to put everything they can get their hands on and then they screen scraping and selling personal data, personal financial data. i know you've written extensively on privacy. do we need a new architecture with respect to financial data than -- we've given it away in terms of our personal data on the information side, on the internet site. do we need a new architecture to be more proactive of our financial data, or family overlay this on the existing system? >> i think there are two solutions to the problem. the first is provider practices, so enabling tools for consumers to be able to really see what information is being collected and then make choices. there are efforts out there, financial data exchange, , i knw they were here before the committee previously and they're creating those tools, and those tools are very helpful and were supportive of that effort. the other aspect though is strong federal privacy floor so the actual includes curbs on data collection and sharing. gla b is tied as a privacy law but it is not, in fact, privacy protected in those ways and so it's time for a new approach. >> great, thank you. mr. ahmed, speaking for venmo and the industry in terms of what you have come up with, are there mechanisms or models that you identify that might address the concerns that we've raised here? >> certainly i want to know something mr. klein raised about merchant acceptance. so in china a lot of the reason why there's been success of their and moving to mobile payment was getting all of the businesses to accept the small code and i agree that maybe it's that welcome baby something else but i just want to stress that when we're talking about consumer adoption, low moderate income consumers can world consumers, if the places where they go don't accept mobile payments, and they won't switch. it's a chicken and egg problem and would also have to include a focus on the merchant site of the equation. >> that's great. thank you very much. my time has expired. i now recognize the gentleman for minnesota for five minutes per thank you, mr. chairman. thank you for the committee for testimony and being here today. it's interesting, , more than oe of you this morning was critical in different respects to the promise that the innovation, new technologies provide. in fact, one of you even refer to the rhetoric that gets used about how this is going to benefit consumers and society. i could focus on several, but in the short time, ms. tetreault, i was particularly concerned by some provisions. your written testimony that just abetted that criticize crypto currency. although you only mentioned libre, which is not in itself a crypto currency, i would hope that you more fully explored these innovations or if you haven't, you will be, and the opportunities that they provide to both build a financial future for individuals but also to empower individuals to control the value of their own assets separate from government control. have you done any of that? >> we have looked at crypto currency, and i have made remarks almost what, six or seven years ago, that the original promise of crypto currency was returning power to consumers. what, in fact, has happened in the intervening years is that what we seen is infrastructure that's built up, that's largely acting as an intermediary, that consumers are not truly empowered to be the own bank. and so -- and these intermediaries are often under regulated, under supervised, that there are not clear goals of the road and so the promise of crypto currency has been lost. there are any number of needs, not the least of which is to fold them into payment into a more rational way to rationalize payments overall. >> well, as defined by your someone else what is rational. seriously, it's your definition of what's rational because there's a whole environment out there brilliant, genius, young people who are coming up with new ways to transfer value every single day, and i worry that we're going to crush that entrepreneurial spirit and that advancement. obviously, you and i have heard of bitcoin. we've heard of get three. are usually with xor p p and te effects of rippled? >> with the distributive lecture payment technology and the payments? >> what about privacy coins like z-cash. >> if i understood the aim of this hearing, that it was, that i was not going to approach the privacy concerns. there are any number of different privacy technologies around cryptocurrencies. .. >> so, i mean, i could keep going through these, but it's amazing things that are happening out there and it concerns me when we're talking about mobile payment systems and we draw in any one of you cryptocurrency or new innovations and suggest that it's a negative because by the way, major companies like ibm are doing work on this, too, the plastic bank is a pilot program proven to be successful in haiti, where digital in returns for cleaning up plastic waste. are you familiar with impacea. rhetoric, m stands for mobile and paca, swahili for money. and it's a microfinancial service launched in 2007 by vodafone, largest network in tanzania, by 2012 it had 17 million accounts. service has been credited with giving millions of people access to the formal financial system and for reducing crime in otherwise largely based-- cash-based society. again, i think we have to take a deeper look at this and learn more about these innovations. it's not black and white. and the real interesting developments come when you start to get into the details and differences in the technology. so, i'd appreciate it, as we talk about mobile payments and move forward, we could be more inclusive instead of fearing what we don't know enough about. >> the chairman yields and recognizes the gentleman from georgia for five minutes. >> thank you very much, chairman. ladies and gentlemen, first let me say that each of your testimonies were very, very informative and opened our eyes, i'm sure to much of what we were only dimly aware. however, this whole issue is sort of bringing us into the new frontier for our entire financial services industry. it's very important. i've been spending quite a bit of my time dealing with an issue that i want to present to this committee, which is are we doing enough to make sure we address this fundamental problem? according to the most recent statistics, there are 58 million unbanked and underbanked folks out there, but what is most startling, most of those are unbanked, meaning they don't have a savings account, not mama, not daddy, sister, brother, nobody in the household has a savings account or a checking account. so let me start with you. how do we address this to make sure that we are providing the transparency, the affordability, the convenience for these consumers, but access to electronic payment systems have traditionally required a savings account or a checking account, which presents challenges here. how are you all at paypal, which has certainly been a forerunner in all of this, addressing this issue to make sure we bring everybody along with us as we make this technology jump? >> thank you for the question, mr. scott. so i think it has to be done in partnership. paypal is a technology company, but there are all sorts of entities on the ground, in the communities in the places where you're talking about and think of retailers, maybe 7-eleven, maybe a walmart, where we can partner with those entities, enable cash to be offered up at the point of sale and then digitize it on the back end. so, i think it's really in getting on the ground in the communities and the places where these people are and providing them a service as i mentioned in my testimony, that's actually more valuable than just a cash-based service. until and unless we create that value proposition that really can respond to the challenges and issues that they're facing, then there won't be a reason to move into this eco system. are you confident, confident that we will not leave these unbanked, underbanked folks behind? >> i would say at paypal we're making very strong efforts to do that and i think it's going to be about everyone in this room working together. public-private partnership and intentionality behind the efforts in order to prevent that from happening. >> do you think there are costs associates with accepting cash for small businesses? >> certainly. and you know, i think a typical small business, when they're accepting cash, they assume that it's a costless transaction, but actually, when it comes to things like, simple things like accounting for that cash. doing payouts to employees, doing payouts to vendors, providing security for the cash, there are actually a number of costs associated with that. my mom was a small business owner and i remember the challenges of trying to account for everything. so, digital kind of transactions can really help to simplify a lot of the processes and reduce transaction costs. >> and miss ford, you've been working very much in this area throughout your career. what are your thoughts on this? >> i mean, i think that we have to recognize that, obviously, there are limitations that financial institutions have because there's a regulatory frame work in which they have to operate, but i think when we look at the experience in the u.s. as well as globally, i think that's one reason we've seen the rise of nonbanks saying, okay, we've got this great technology out there and we want to try to be some sort of link to consumers, so if we can be that intermediary and try to, you know, get somebody who is unbanked to be more comfortable, maybe it starts with a gift card or some sort of a-- some sort of pre-paid card they can load with cash, but that gets them slowly in the financial services system and then can become banks, you know, that's obviously where we want to move things. so, i think that, you know, we're making progress, but i agree with you, i mean, you know the unbanked issue is very real. it's one reason that we have a whole consumer segment who are constantly saying how are we going to make this as inclusive as possible. but financial institutions are constrained by certain regulations as well. >> thank you very much, thank you, chairman. >> gentleman yields. the chair now recognizes the gentleman from missouri for five minutes. >> thank you, mr. chairman. mr. klein, you made my day today when you said a while ago that the seniors and millennials have something in common with regard to cash, and first time ever in an account with millennials. >> you're welcome. >> thank you. one of the attributes and benefits, i guess of being a little older and been through the mill here a little bit is the fact i remember when credit cards came out. yes, i'm that old. and moses and i came down the mountain together. and i remember everybody said that's the end to checks, no more checks, credit cards take over and checks are gone, but as today, the federal reserve bank of st. louis says we've actually got twice as much cash in the system as we've had 10 years ago and still have as many checks issued today 40 years ago, 50 years ago when credit cards came out and now we have all different sorts of payment systems out there. if i was a new-- funding a new business today i would have all of these kinds of payments because it enhances ability of myself to be a new business, to transact business and attract everybody in and enable them to make the transaction. when people get exercised here, this is going to happen, that's going to happen, take a deep breath and step back. this is an alternative, another way of doing this. i come from the point of view of, okay, how can we do this in a safe fashion. and i think ms. ford made good closing comments in her testimony a minutes ago, and i think miss tetreault made comments with regard to libra and cryptocurrencies and that's used for money laundering. enabling people to do fraud and launder money. it's the ability to enhance the mobile phones and different types of payment transactions and i would like you to elaborate on your final comments how we can make a faster system, yet a safer system and be more inclusive. >> absolutely. so, i think, you know, again, one of the elements that is driving this whole conversation around faster payments, besides the fact that other countries have implemented faster payment systems is we have better technology out there. i think as we look to, for instance, the experience in the card space as relates to security, we've seen some great innovations around encryption and tokenization where the idea is that the mindset used to be, how do we protect our sensitive information from, you know, being subject to unauthorized usage. now i think, you know, we know how sophisticated the criminals are, so the conversation has shifted to how do we devalue the data because it's likely that there's going to be some sort of a breach somewhere. right? so i think those are the things we're looking at in the context of faster payments as well which is how can we continue to leverage these types of innovations. if you look at fraud prevention practices historically in payments. a lot of that is manual processes, individuals in front of a monitor trying to look at transactions and now we can think about, okay, how can we leverage artificial int intelligen intelligence, for instance, or machine learning. and biases in there as well. i think there are opportunities to leverage this technology to add security components. >> thank you for that. you talked about the concerns that some folks who can't work with a bank because of the costs involved there and have to go to strictly cash way of living. have you found that because the banks charge for cashing checks or more having an account or for a minimum amount that you have to have in there before you get free checking, is that the kind of problem that you see? >> yes, those are some examples and just to clarify, not only are people pushed out of the banking system and forced to rely on cash, but in the vacuum that they leave in the neighborhood where you see the pawn shops and rent to own stores and so on. >> why do you think that the banks are having to charge those fees? >> well, i think that the banks made pretty clear. first of all, there's been a wave of deregulation of the banks and weakening, consumer financial protection bureau and others rules that govern banks. we think that the banks made it clear they're not interested in serving people, the minimum balance that banks require in order to avoid fees is one impediment. identification requirements that go far beyond what regulations require are another impediment to millions of americans. >> have you talked to any banks and asked what it costs for an account? >> yes, we're very aware of the costs of implementing banking. >> so it's difficult to give a service for free unless you can find another way to subsidize that within your institution. >> right, i think one of the problems in terms of checking accounts, it's low income people through overdraft fees that are subsidizing free checking of more affluent people and so, yes, he we believe that there are costs and ways to manage the costs, but right now the costs are not born fairly among the bank's customers and you can look at who pays overdraft fees, it's a small percentage of people and lower income segment. >> those are loans, by the way. thank you very much. >> the gentleman yields. >> thank you, mr. chairman, and thank you to the witnesses for being here today. really appreciate it. obviously, we're hearing a lot of discussion about the benefits that mobile payments can provide as the co-owner with my husband of a digital design firm who uses paypal every day nationally and internationally for payments i've familiar with the benefits and i think there's absolutely so much opportunity to help people with better services and i need to hopefully we'll see more of that down the road, however, i'm concerned that we're leaving some people behind. we've been talking about it today with smartphone and internet access, people can't use these wonderful services as we well know. and the fcc estimates that approximately 20 million americans lack broadband service and i certainly know that in the state of iowa. also, due to the issues with mapping, we know that that number is probably far greater than just 20 million. in fact, microsoft estimated that 150 million americans aren't actually using the internet at broadband speeds, which they would need to be able to perform these functions. and a lot of these people are unfortunately in my district. that kind of difficulty is why iowa is one of the top five states, as mr. klein pointed out, in terms of use of cash. so, mr. klein, i'm worried that moving too quickly to mobile payments will risk exacerbating what we're already seeing with rural communities absolutely being left behind. i'm trying to keep them getting the opportunities that we need. are you seeing that moving to mobile too quickly and risking the opportunities for rural communities is something that your research shows to be a problem? >> yes, congresswoman. it's very important to appreciate that as the economy digitizes, there are huge benefits and those benefits then are not accessible to people without the ability to transact in that. i think a lot of the conversation about preference for crash that we've seen. if you dig into the data, what you really see is a rise in on-line purchases, particularly for that age category between 30 and 60. now, whether that's consumer preference or choice, or whether that's just a changing nature of our economy because you can get the goods better, cheaper, faster, to be debated. what does it mean for people that don't have the ability either to access that material on-line and to have the ability to make a payment on-line in a convenient and low cost fashion. if you risk an overdraft to buy something that's $5 cheaper on-line, it may end up costing you $30 more. and part of the problem, why there are so many overdrafts is i don't know when my paycheck is cleared. if i get paid tomorrow on the 31st of the months, 10% of americans get paid monthly, 38% get paid biweekly, a lot of people get paid tomorrow. do not mistake direct deposit for immediate deposit. you're not certainly if your funds are available the very next day. this makes life challenging for people in rural america and paycheck to paycheck. the sad reality they have the tools to fix that, 10, 15, 20 years ago. united kingdom went to real payment in 2008 and mexico in 2004. so i think for your constituents in rural america, you're facing a double whammy. you have this access problem and you have a means of payment problem. and particularly for those living paycheck to paycheck, and older people, for example, may be relying on social security, it becomes incredibly challenging for consumers to be empowered enough to be able to access to all of the on-line benefitsments and for the state who has the fourth oldest population in the country i appreciate your concern that they get the social security that they need. moving on. mr. ahmed, you mentioned in your opening statement that paypal is committed to serving every american or something to that regard. so bringing broadband to all iowans is a major priority for me and i'm on the whip through broadband task force and i think it needs to be a priority for all of the american economy or we will leave parts of in country behind. so, i want to ask you specifically, since you work for paypal and really asking all of the mobile payment community to get behind this priority so everyone can actually benefit from what you have to offer. as a recipients of your product that i know works well, we need everybody to have access to this. my small business owners in iowa need to be able to utilize services like yours. are there steps you're able to take to help us spread the access more quickly than we're doing right now? >> well, i think we can be supportive of course of your efforts and we can also add in, kind of, you know, our perspective on the benefits that access provides in terms of increased growth and increased payments. and i would also point out that, you know, you highlight access as such a key issue and it's also cost and kind of driving down the costs for individuals in particular in rural areas, and making sure that the data is not so expensive, yes, you can have access, but you can't actually use it. so i think we can be supportive of your efforts and would love to kind of partner on that and figure out how we can be helpful. >> well, we will be in contact because we need your help. i yield back. thank you. >> the gentle lady yields. the chair now recognizes the ranking member emeritus of this committee, the gentleman from arkansas, mr. hill is now rec nieced for five minutes. thank you, chairman lynch. great to be with you and great to have a broad payments hearing today and thank you for making those arrangements. got a great discussion. i've enjoyed hearing everybody's presentation. mr. ahmed, i was interested in your testimony. 40 million users and 28% of paypal's total volume is venmo i take it and like my friends from massachusetts i have a regular venmo user in my family. my question is of the 40 million people, how many of those users have an account balance with venmo or paypal, meaning there's cash left in their name out on the system, would you guess? >> i don't have the exact number, but it's written and-- >> i'd be interested in that exact number and what the average balance is because everybody knows those are not fdic insured deposits and reminds me of the old american express travelers checks. you know, of the '60s, where you have this money that paypal gets to use, but people may or may not know they have it. so if you follow up with me i'd appreciate it. also i was pleased to read about your being involved in the faster i.d. alliance and i assume, ms. ford, you're also involved in the faster i.d. alliance? >> i'm not personally, some of ours members are, yes. >> i think that's foreign because in this fast force we've talk about the building blocks of a digital future, so, authentication is fundamental to get away from name and password, and so, if you could send me some follow-up information on that, who the members are and what's being done there, that would be of interest. i want to turn to tokenization and you referenced that and also ask ms. ford first on that. this idea that, excuse me, banks and non-banks have a payment rail out there in the payment system, we have wire transfers, we have ach, we have swift, we have cash, obviously, we have mastercard direct. we have all of these different methodologies and my question is, could we have an approved regulatory rail that's block-chain based and available to banks and non-banks equally where someone could propose a block chain effort and that-- what does that look like from a regulatory point of view? that rail? so it's not a debit rail, it's not a credit rail. it's a block chain. whether there's a cryptocurrency involved or not, be neutral on that. what are your thoughts, ms. ford, on that? >> i'm not sure how authorize $i am to speak on that issue. i'm not an expert on that type of technology. but i would say that i don't think it would be a limitation of technology being, you know, able to support that rail. i think it would actually come down to whatever policy implications there are and i think, you know, and christina has alluded to some of this as well, that i think, you know, there's an inconsistency in the way that block chain or distributed ledgers regulated today. it seems to be happening mainly at the state level so that kind of inconsistency with the regulatory environment might be one of the limitations that could exist. >> mr. ahmed, do you want to comment on that? >> i would just note that for the kind of core banking architecture, i think there would probably be some changes needed in terms of federal reserve system. but for, you know, smaller valuation or smaller amount payments, i think you already are seeing some block chain based systems moving the money. i think there are examples out there, we have talked about others that kind of offer this. >> mr. klein, i'm a-- for 40 years in and out of the banking business, small banks and larger ones and i couldn't agree more with your testimony about access to available funds and the timeliness of that. we felt we were going to get there in 2004, obviously, and this is a huge frustration to people and it leads to higher overdraft usage because of that two or three day gap. i think we do have a financial literacy issue there, too and dr. foster and i worked a lot on that. people don't know they can schedule payments around pay day calling the 1-800 number and doing it, so they're juggling when they could move everything, given that. what should the fed do about, you suggested up to $5,000 be available if it's-- i get complaints about this from my constituents. >> so, under the expedited funds availability act, that requires the first $100 as you well know to be made available immediately, the federal reserve has all the legal authority to change that number. >> to change that number. >> and to change the amount of time up to $5,000 for customers of more than six months. >> thank you for that. >> we'll talk more about that. yield back, mr. chairman. >> gentleman yields back. the chair now recognizes the gentleman from ohio, mr. david z mr. davidson for five minutes. >> thank you, our guests safe to say we don't agree on all the issues here. the shared thought that data breaches and arbitrage impose risk to consumers and we need a new architecture to set parameters what data can be collected or transferred and preserve what has worked so well for so long with the u.s. dollar. cash is an incredibly important tool and the features of it are an i alluded to it by mr. hill when talking for banks for individuals. u.s. dollar if i exchange it, i don't have to go to a bank, i can transfer it between any one person, it's recognized as legal tender throughout the united states, and i don't necessarily have to share all kinds of personally identifiable information when i get it. some people hate that. but the reality is, when you go to a bank, our system of laws requires the bank to know all sorts of things, and frankly, to spy on all of their customers in order to continue to be permitted to operate. and they do that largely to keep us safe and to protect us from crimes and things like that, but there is this system of cash that is still permissible for peer-to-peer. so, as we talked about block chain, you know, i don't think, you know, everyone would agree in terms of where we're at with block chain or crypto based assets, but i think it's largely a matter of whether it's understood or rightly understood, in my opinion because there's a fear that there's all of this abuse. there's been some fraud in the crypto space and rather than-- the solution isn't just to avoid that space altogether, it's the exact opposite. it's to provide regulatory certainty and legislative clarity that does not exist currently. block chain broadly protects personally identifiable information and done correctly, it eliminates or can eliminate intermediateri intermediateries, true ledger technology. how could we do this? it's not a partisan issue as i've said. i've got co-sponsors for legislation for people who support bernie sanders and co-sponsors who support donald trump and co-sponsors from the north south, east west and when we continue the broken status quo that protects incumbents at all costs or embrace-- and disrupt the system. congress got it right and the internet flourished. congress did not try to understand everything about the architecture of the internet and clearly, anytime there's a hearing about the topic, congress still does not understand anything about the internet. in fact, no one has envisioned all the use cases for the internet. internet technology. how does all of this relate to payment? innovators and payment systems are flourishing, but unfortunately we're launching projects outside of the united states. to find legislative clarity in places like switzerland or singapore. will we unleash the power of our innovative economy? will we provide legislative certainties where it's absent with bills like the bipartisan token taxonomy act. the foundation of privacy and finally will we allow all americans to interact freely and privately without those that often compromise our data. they slow the system and charge fees and do make banking less accessible to some people. and mr. ahmed, perhaps as a bridge between the old economy and the new economy, what are your thoughts on the framework that i've laid out here. >> certainly i completely understand the framework and need for anonymity and it's the crypto aspect of the cryptocurrencies are or payments solutions that level the block chain and i think you see that in varying address as i mentioned with tokenization technology, reducing the amount of actors that have access to financial information. i think it's certainly something that people demand, something that there's technological fixes for. as you acknowledge there are real concerns from a government perspective about various financing, money laundering and figuring out a balance between the two and as a result, i think it's the key question. >> good points and i think i'm encouraged by things like technology on a distributed ledger that lets you follow it. so you do have privacy, but you don't truly have secrecy. you have a much more transparent system with a distributed ledger than with cash and so far i haven't heard calls to eliminate cash, thankfully. my time has expired. thank you all. >> the gentleman yields back. the chair now recognizes the gentleman from ohio, mr. gonzalez for five minutes. thank you, mr. chairman and thank you for our panel today. and i thoroughly enjoyed this discussion and we have a lot of different perspectives and opinions on this, which i think reflects, frankly, some of the challenges that we have legislatively. it's always seemed to me that with respect to we're not sure where we want to go. we think we have a destination in mind, but how we get there is always different. and ms. del rio. i want to start with you and try to summarize part of your testimony and just give me a yes or no whether you think i kind of got it. i saw a lot of claims that seemed to be that fintek is primarily more about jargon -- and expands access, is that a fair characterization? >> sort of. >> okay, can you clean it up for me? >> sure. again, it's not to malign innovation or technology, they're not intrinsically bad or good. my point, there's been a lot of sort of, you know, technology solutions and solve the problem of the bank and inequality and deeply entrenched problems that we talked about today and that your committee is well aware of. i think my point was to sort of-- the committee is to underscore that our experience and those of other advocates, community groups, financial institutions as well that work with low income people, with immigrants with these marginalized communities, don't experience these benefits yet and in fact, it's often the reverse where they promise that this is a stepping stone to greater access and to greater opportunity-- >> and so i want to turn to mr. ahmed. can you talk specifically about the work that you all have been able to do by being the payment space specifically with respect to affordable credit for small businesses, minority businesses. i hear about this from folks in my district, frankly, they love products like yours, they have an ability to access credit in a way they otherwise would not have. >> certainly, thank you for the opportunity. so we have a product called paypal working capital and it leveraging the merchant payment data that we secure and partner with the bank and offer a loan. what we find is that 70% of the loans are going to the counties that lost 10 or more banks high school ms. del rio mentioned due to the financial crisis. we fill in the gap and 32% of the loans are women-owned businesses in financial institutions it's 16%. women own businesses are 32% of the economy. it's the ability to offer that loan to the individual that needs it anywhere in the country, very, very quickly, in a secure manner and in a convenient manner that i think is really the distinctive part of the product. >> and of course, it's because you have access to that pro pryty dapry ty -- propriety data and in your experience or at least with that product, the innovation has been working and has been expanding opportunity which completely mirrors the feedback that i get and i'm sensitive to the comments of ms. del rio. i think it's absolutely legitimate that, you know, we need to, as we're thinking through the regulatory environment, making sure that access is a central component of what we're doing. but i think if we're in a world where we're going to try to stop all innovation, kind of in advance because of a fear of something that may or may not happen, i think that's a dangerous place to be. and then with respect to, you also mentioned, mr. ahmed, we have 50 seconds, amlbsa compliance. as we transition or potentially, hopefully transition to more of a block chain system, that's one concern that everybody raises. can you just provide your perspective on that. is that a tech challenge? is that a regulatory challenge? how can we be comfortable in at that role? >> i think as we heard, there are technological solutions to be able to track, you know, transactions even with cryptography. depending on the cryptography, there's quite a range, depending on the solution offeredment and a regulatory challenge how do you actually go after the types of things that you're worried about and ensure that legitimate transactions are getting through. so i think it's probably a little bit of both. >> great. thank you, and i yield back. >> the gentleman yields back. the chair now recognizes the gentleman from new jersey, mr. payne, for five minutes. >> thank you, mr. chairman and let me thank you for allowing me to sit in today with the task force. and you know, being a guest here and allowing the other members on the committee to go before me, your thunder kind of gets stolen, but i'd just like to associate myself with the comments mr. davidson of ohio made in terms of cash. for me, it's about choice and i'll ask ms. del rio and mr. klein, what happens to that segment of the country that does not come along with this move towards other currencies? what happens to the grandmother that just can't learn all of this rigamarole on the phone? what happens to the child that their dad gives them a dollar to go get candy? i mean, you have to carry a card now or say, here, here, son, here is a credit card, go get yourself a lollipop? it's about choice and that's when the issue was raised is cash still king, i don't know if it's king or not, but in the united states of america there should be a choice and there are underserved, underbanked communities that are not going to rise. i still unfortunately don't use paypal because i have not learned to use it yet and i would consider myself fairly-- well, fairly savvy, but there are just communities that i'm concerned about that i represent that are just not going to ride this change. and privacy issues. cash is still the only one way that you have total privacy in this country. wa wa, the convenience store, was just hacked several days ago. 30 million people's information. 30 million americans' information. forget about target several years ago. so cash still really -- is really america, it's the american way. a legal dollar, george washington's face on the dollar and we're talking about doing away with that. you're doing away with a segment of the country, the statistics are right behind you. 34% of african-americans use ca cash. that's a major segment of the country. so, what do you say to making sure that there is a choice in this country? that's what this nation was built on, having the choice, not that we aren't going down that road, but to not have a choice in the matter is my concern. miss dell rios. >> thanks, i appreciate your comments very much. i want to stay i've been doing this work since mid 1990's. at that point people were predicting the demise of cash and there were going to be no more bank branches anywhere, everything was digital and technology based and that hasn't born out. i appreciate your comments and note in new york city, our council passed a ban on cashless businesses for sort of the reasons you outlined. the impact it would have, the racial exclusionary of keeping people out of store fronts which is problematic. when i started doing this work is when public benefits were starting to be transferred to electronic benefits cards and at that point our organization and many others raised the concerns that you're mentioning. how would that impact people who don't have easy access to bank batches or atm's in order to access their food stamps and what we've seen people paying out huge amounts to benefit their fees, to access their cash benefits, publicly subsidized benefits. they have to take buses to use their benefits cards and things like that. so, that's just one small example, but it bears out in many other ways. so, i think we absolutely agree, and i think the panel agrees that cash shouldn't disappear, people should have their choice preserved and protected and that stronger action by congress to make sure that people have, you know, that they are protected no matter which choice they make. these are fundamentally key things that we are going to build infrastructure that allows for greater options for people. >> new, i see my time. i'll yield back. >> the gentleman yields and the chair now recognizes the gentleman from wisconsin, mr. style, who is recognized for five minutes. thank you, mr. chairman for holding today's hearing. i think we've heard a lot of discussion today that's focused on the idea that innovation and adoption of mobile payment technology could lead to financial exclusion. there's people in this country who are are on bank and lack access to smartphones. it creates an environment where everybody benefits from inno vision that we are creating. i think there's a way to create this technology to promote financial inclusion. i look to mr. ahmed and i think for us. i think it's important to step back maybe and put a context to this and i dug up some numbers, pew research, 96% of americans own a cell phone. 10 years ago it was about 85%. 81 is% of adults owned a smartphone back in 2011, about 35%. the numbers for smartphone ownership rates by white, black and hispanic adults the study found nearly identical. 82, 80, 79%, reasonably identical rates. and while lower income adults are less likely than those with higher incomes to own a smartphone, the overwhelming majority of respondents earning less than $50,000 per year did own a smartphone. some interesting data. 71% of those earning less than $30,000 have a smartphone. 78% for those earning between 30,000 and 50,000. so i think we're seeing this trend not only in the united states, but globally. 60% of adults in brazil, 52% in mexico, 41% in kenya have smartphones and the numbers are continuing to rise at a very aggressive rate. and so, given the adoption of smartphones in the near total penetration, i think we should be having a conversation about how mobile payments can foster inclusion than rather the risk of financial exclusion. we should identify the risks, but i think we should spend some more time on how this can actually help us moving forward and how technology can actually help those that are unbanked. mr. ahmed if i can ask you, if your testimony, you mentioned that, i think, quote here. the most significant barrier to mobile payments for underbanked consumers is their poor come patability on the way in which unbanked consumers often earn and use money, end quote. can you elaborate on that comment just a bit? >> certainly, so if your employer-- >> there's a smartphone for us. >> if your employer pays you in cash and then if you're living in a community where most of the options available for you to get your groceries or to, you know, take transportation, if the-- you know, the common method of acceptance or the preferred method of acceptance is going to be cash, then it makes a lot of sense for you to be using cash. but i appreciate you highlighting the point about financial inclusion and the way that we're thinking about it at paypal is really about financial health and can we create propositions using the full suite of services to say if the digital payment is accepted by the merchant, whether often credit to the merchant or lower costs or on the consumer side. so, that's really where we're trying to focus and to do it in partnership with a lot of the entities from the ground. >> as we go back and look at the widespread adoption of smartphones and continuing trend lines across the united states and across different demograph groups, can you comment on how that is allowing paypal to serve some of these individuals that were previously unbanked? >> certainly, no. we are riding a very strong trend in this space, in the mobile payments-- in the mobile, you know, access space and we're seeing mobile payments grow as a result of that. so, certainly a lot of the core for focus of the company, is to create better and more experiences for people to better be able to use again, everywhere they go. >> i appreciate your comments and time here today. i do think, as we spent a lot of time today identifying some of the risks, i think it's important that we also identify a lot of the positives that some of these mobile payment technologies can assist those that are currently unbanked in our system. thank you very much. i yield back. >> gentleman yields back and the chair will now recognize the ranking member for some closing remarks. five minutes. >> thank you, mr. chair. and again, thank you for the committee for this interesting discussion. i really appreciate my colleague from wisconsin, i think, pushing the reset button and getting us to refocus because a lot of what i hear when we talk about technology reminds me of what humans have dealt with since the beginning of time. we fear what we don't know. and by acting before we really understand what we're dealing with, we have a tendency to drive-in no evaluation and more importantly, the entrepreneurs responsible for it, the great science and everything else, out. we should lead when it comes to these technology advances. frankly, i was listening to a comment when you said that we banned cashless businesses. that's actually kind of sad and the next follow-up is we need government to give us more solutions. if you think back to 2007, i believe we had roughly 9,000 community banks on main street across this country. we had roughly 9,000 credit unions like the one that you chair. a year later, the crash, we still had roughly after the crash between 2008, 2010 or 11, we still had roughly 9,000 of each and then congress rushed in to help, like congress did with the savings and loan crisis and every other crisis, because government's got to save us from ourselves. and ever since, it's accelerated. the pressures on small community banks and credit unions, to the extent that we now have roughly, i think, less than 6,000 of each and we're losing more every day. rather than trying to create an environment where we're creating more main street banking opportunities. so the idea the government's going to solve it by banning it, and i just want to give you something, because i think it's funny when i hear from even one of my own colleagues that crypto is the preferred method of laundering money. well, my colleague, mr. payne just pointed out, the only truly private thing left is cash. we can identify people on the internet. you can't necessarily identify somebody who is carrying around suitcases of cash and i think the comment was, el chapo had $200 million in cash on his property. i had my guys check. i don't think he had any cryptocurrency, by the way. his son might have, but he didn't. i would suggest to anybody who's interested, again, because i think the rhetoric really is, this is dangerous, technology is going to disenfranchise because we don't learn it. by the way to my colleague who says, what about the grandmother who doesn't know or the child, i agree with him. i'm one of those people who i go out of the checkout line at the grocery store, sir, the self-serve is open, no, i want to talk to somebody. if i go through the self-serve, i want the employee discount because i'm doing the job. i should get the discount, but i think, while we should be concerned always, and i respect and many very sensitive to the fact that we are all thinking, i hope, in the same vein. we want people to have access and empower and grow and lift themselves up. we just look at it a little differently, i suggest if you haven't, take a look at the book "the age of cryptocurrency", this book begins with a story of afghani women who are typically excluded and shunned from taking part in finances, a cultural issue, these afghani women were using bitcoin to build up a financial livelihood and store value that is solely theirs. this is the kind of empowerment is not something i think we should be just tossing aside because again, we can't see all the things out on the horizon. we have to make sure we're very careful and in this institution in particular, has to start moving a little quicker with the certainty questions that we talked about on the marketplace because at the end of the day, that is where we're going. and i think people need to be very clear. we can either help facilitate this technology advancement or it's going to happen without us. and god forbid it happened somewhere elsewhere we don't have any say. so, again, thank you to the witnesses and mr. chair, thank you very much for having this hearing today. >> absolutely. thank you. thank you for your remarks as well. and in closing. i do want to point out the difficulty here that we face and you know, i was in somalia last week, we did a trip down to the horn of africa and i know the need for secure banking apparatus to help that country recover. all the big banks have left because of the threat of reputational damage due to the control off al-shabaab and that country. and you see that would allow that country to recover. so clearly there are some advantages to be had in a digital system that is secure. it's a very different circumstance, but i clearly see the benefits. but i also see the benefits that are our regulatory system has secured. you know, back, most of our regulatory system on financial side, the traditional system has been created as a result of responses to calamities in this country, right? so we had 9,000 bank failures during the depression. 9,000. congress came up in coordination with the sec and others and created the fdic. so we have federal deposit insurance corporation and now, you know, we don't-- even though we had, you know, major catastrophe in the recession in 2007-2008 we didn't see all the banks closing down like we did before. so there are advantages to having those intermediate arrii and i'm a bit concerned about the push for block chain in had a system that eliminates the implant immediateries, it's peer-to-peer. we go around federal reserve because it's peer-to-peer, we go around treasury and since then the crimes enforcement network and we go around them to allow to rebalance and correct some of the inequities. it's a big challenge, but extremely interesting and so, i agree, we've got to try to tackle this and get the best, get the best out of the system like that while protecting against the worst aspects of what some of this new untested technology might present. so i want to thank you all for the wonderful testimony. all of you brought your a-game here today and really helped us work through some of these issues. they're extremely complicated, but we want to understand how this affects everyone, right? the banking industry has tended to gravitate towards the needs of the wealthy. i was in iron work for 20 years and i became union president and we had a council so that the men and women on the job could cash their checks at the end of the workday and i remember a bank, a big bank, still around, and told me, as union president, they didn't want to do business with my workers anymore because the amount of money they were making on their transactions didn't cover the cleaning of the rug because my guys and gals were coming in with muddy boots. so, you know, that type of elitist attitude we want to take care of the rich folk and not the workers so much, and you know, that's where the money is on the high end of this spectrum. we have to be careful. we have to be careful if we're designing a system that it is inclusive of everyone. and i think we can do it. i think we can accomplish the goals of -- that have been articulated up here, we've just got to be smarter about it and part of the way is the way we engineer this and part of it is the way that we not only engineer the architecture, but also regulate it on behalf of the american people because we are the only group that can really intercede on behalf of those people in our economic system and our legal system. so, thank you very much for your testimony. as always, let me just read this closing-- if i can find it. members shall have five days-- okay. without objection the following letters will be submitted for the record. letters from the american for common sense, cents. coin star electronics payment coalition. the electronics transaction association, money services business association, national association of convenience stores, national association of federally insured credit unions, the payment card industry, security standards council and square. and the american bankers association, javelin advisors services and honorable mr. donald payne, jr. thank you. without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for their response and i respectfully request that our witnesses please respond as promptly as able. without objection all members have five legislative days to submit extraneous materials for inclusion to the chair for the record. this hearing is now adjourned. thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> article two is adopted. >> do you solemnly swear that in all things apertaining to the impeachment trial of donald j. trump you will do i am partial justice according to the constitution and laws so help you god? senate will convene as a court of impeachment. >> what we've seen over the last couple days is a dissent into constitutional madness. >> again, we think the basis upon which this has moved forward is irregular to say the least. >> donald john trump president of the united states is not guilty as charged in the second article of impeachment. >> for the third time in u.s. history a president has been impeached and acquitted. from the house hearings to the senate trial, c-span has provided live comprehensive coverage of the impeachment of president trump. you can find all of our video and related resources at c-span.org/impeachment. c-span, your place for unfiltered coverage of congress. >> the u.s. senate is about to gavel in. judicial nominations are on the agenda today. lawmakers will continue work on the appointment of andrew brasher to be a judge on the 11th circuit and take a break for the party caucus lunches at 12:30 and return at 2:15 eastern to take a final vote on the nomination, along with procedural votes on four other judicial nominees. now, live coverage of the u.s. senate here on c-span2. the president pro tempore: the senate will come to order. the chaplain, dr. black, will open the senate with prayer. the chaplain: let us pray. almighty god, unto whom all

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