Latest Payments News: MPs Launch Inquiry Into AI's Role In Financial Services, and more

Catch up on some of the stories our payments compliance analysts have covered lately, and stay up-to-date on the latest news.

MPs Launch Inquiry Into AI's Role In Financial Services

UK lawmakers on the influential Treasury Select Committee have launched a new inquiry into the growing use of artificial intelligence (AI) in banking, pensions and financial services, with a focus on consumer protection and financial stability.

“My committee wants to understand what that will look like for the financial services sector and how the City might change in the coming years as that transformation gathers pace,” said Meg Hillier, chair of the cross-party committee.

The committee, which has recently been scrutinising access to cash, has now opened a call for evidence, seeking input from industry experts, AI specialists and the public.

With 75 percent of firms already using AI, and adoption set to rise, MPs will examine both opportunities and risks, including cybersecurity threats, job losses and potential bias in AI-driven decision-making.

The inquiry will also assess whether current regulations are fit for purpose or need updating to address AI’s rapid evolution, and submissions are open until March 17, 2025.

“It’s critically important that the City can capitalise on innovations in AI and continue to be a world leader in finance,” said Hillier.

However, the backbench Labour MP added that there is a need to “be mindful of ensuring there are adequate safeguards in place to mitigate the associated risks, particularly for customers”.

“This piece of work will allow us to see the full picture.”

Westminster’s work here reflects developments elsewhere, such as the EU, where the European Commission ran a consultation on AI use in financial services last year.

Card Payments On The Rise In The Eurozone, Latest ECB Stats Show

The European Central Bank’s (ECB) latest data on payments being made by consumers in the EU reveals growth in all areas, with card payments accounting for more than half of non-cash payments.

The use of card payments in the euro area surged in the first half of 2024, accounting for 56 percent of all non-cash transactions, as the total number of digital payments rose by 7.4 percent to 72.1bn, according to the ECB.

The figures highlight the continued shift towards cashless transactions, with contactless payments playing a part in this.

Contactless card payments saw a 13.2 percent increase, reaching 25.8bn transactions, and their total value rose 13.1 percent to €0.7trn. This rapid growth suggests that consumers are increasingly favouring speed and convenience at the checkout.

Overall, the total value of non-cash transactions grew 1.9 percent to €113.5trn.

Within the wider digital payments landscape, credit transfers made up 22 percent of transactions, direct debits came to 15 percent and e-money payments were 6 percent overall.

The ECB also reported a 4.4 percent rise in the number of payment cards in circulation, to 720.6m — an average of two cards per euro area resident.

Meanwhile, the average value of a card payment stood at approximately €39 per transaction.

Retail payment systems in the euro area processed 52.1bn transactions worth €25.1trn in the first half of the year, reinforcing the region’s growing dependence on digital payment infrastructure.

BaFin Flags Virtual IBANs As Money Laundering Risk

Germany’s Federal Financial Supervisory Authority (BaFin) has joined the European Banking Authority (EBA) and the Banca d’Italia in raising the alarm about the use of virtual IBANs for illicit financial transactions.

The regulator has identified virtual IBANs (vIBANs) as an area of significant concern in its Focus 2025 report, warning they could hinder efforts to prevent money laundering.

BaFin confirmed that it is conducting a field study to assess the use of vIBANs in Germany, particularly in high-risk business models, and will introduce targeted supervisory measures based on its findings.

Unlike traditional IBANs, vIBANs replace invoice numbers and payment references. This streamlines transactions, but it also makes it harder to trace the origins and destinations of payments.

According to BaFin, this could complicate customer due diligence and transaction monitoring for banks and payment service providers.

A major risk is that vIBANs can be assigned country codes that do not match the actual account location, potentially misleading customers and regulators.

As the EU prepares to launch its Anti-Money Laundering Authority (AMLA), BaFin is stepping up its oversight.

The regulator has plans for at least 75 special audits across banking and non-banking sectors during 2025, ensuring firms enhance their transaction monitoring and data analysis.

New US Stablecoin Bill Signals Lack Of Unity On Legislative Agenda

Four US senators have introduced a new bill to regulate payment stablecoins, in a move that borrows mostly from an existing bill and clashes with legislative plans outlined in a Trump executive order on crypto and AI.

Earlier this week, Senators Tim Scott (R-SC), Bill Hagerty (R-TN), Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Guiding and Establishing National Innovation for US Stablecoins Act.

Also known as the GENIUS Act, the bill aims to establish a clear regulatory framework for payment stablecoins, including a new licensing regime for issuers, transparency and prudential standards.

The four senators are all members of the Senate Banking Committee, which, since President Trump’s election victory, is now chaired by Senator Scott.

“Stablecoins enable faster, cheaper and competitive transactions in our digital world and facilitate seamless cross-border payments,” said Scott.

“This legislation will expand financial inclusion and provide much-needed clarity to ensure the industry can innovate and grow here in the US, while protecting consumers and promoting the US dollar’s global position.”

If adopted, the GENIUS Act would require issuers of stablecoins with a market cap of $10bn or more to be regulated at the federal level.

If the issuer is an insured depository institution, its primary regulator would continue to be its appropriate federal banking agency.

If the issuer is an insured credit union, its primary regulator would be the National Credit Union Association.

And if the issuer is a non-bank financial institution, its primary regulator would be the Office of the Comptroller of the Currency (OCC).

“The primary federal payment stablecoin regulator shall establish a process for the licensing and regulation of these entities,” the bill notes.

For issuers of stablecoins with a market cap of less than $10bn, the act would create an option to be regulated at the state level rather than the federal level.

However, state-level regulations must be “substantially similar” to those at the federal level, and they must be personally approved as such by the secretary of the Treasury Department.

States that wish to introduce their own regulatory regime must submit their proposal to the Treasury for approval within one year of enactment of the bill.

Persons that issue US dollar stablecoins without a licence will be subject to civil penalties and can be fined up to $100,000 per day.

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