US payment innovation may hurt bank profits

Significance

Although the volatility of virtual currencies has limited their utility, New York's Superintendent of Financial Services Benjamin Lawsky has pledged to implement regulation of virtual currencies early in 2015 and warned banks to improve their own payments systems or face regulatory action.

Impacts

• Payment methods such as Apple Pay, which link to existing credit cards, will not lead to any considerable innovation.
• A proposal to use interbank fees to offset necessary technological upgrades might overcome bank opposition.
• Regulating virtual currencies may lead to one gaining a market dominating position, as with other virtual platforms.