Payments News Update – September 15, 2023

Legal and Regulatory Developments

SPOTLIGHT: The CFPB Eyes Tech Firms’ Role in Governing Tap-To-Pay
Digital Transactions News – September 8, 2023

The Consumer Financial Protection Bureau late Thursday released a report raising questions about the part restrictions imposed by big technology firms like Apple Inc. and Alphabet Inc’s Google subsidiary may play in hampering innovation, consumer choice, and the growth of open and decentralized banking and payments in the U.S.

The report, called “Big Tech’s Role in Contactless Payments,” notes that as the United States shifts toward open banking through data portability in consumer finance, any restrictions from the dominant mobile operating systems will have “an outsized effect on access to payments systems and may hinder the development of a truly open ecosystem.” . . .

CCCA Backers Target Vote This Year
Payments Dive – September 12, 2023

The National Restaurant Association, NACS and other backers of the Credit Card Competition Act are counting on a Senate vote on the legislation this year. The bill is aimed at injecting more competition into the U.S. card network arena dominated by Visa, and its rival Mastercard.

It would require that a competing network, other than those two, be made available to merchants for processing credit card transactions. Supporters base their expectations for a vote largely on word from Kansas Republican Sen. Roger Marshall’s office that his party’s leadership in the chamber supports a vote on the agenda for this year. . . .

Fed’s Barr Says Central Bank ‘A Long Way’ From Any Decision on Issuing Digital Currency
Reuters – September 8, 2023

The Federal Reserve’s top regulatory official said on Friday the central bank is “a long way” from any decision on whether it would issue its own digital currency, and added it would not do so without official support in Washington.

Fed Vice Chair for Supervision Michael Barr said while officials are investigating a central bank digital currency (CBDC), the Fed was far from any decision. He added it would only proceed with one with “clear support” from the president and authorizing legislation from Congress. . . .

Buy Now/Pay Later Fintechs Pin Hopes on Plastic Cards
American Banker – September 7, 2023 (subscription required)

U.S. consumers juggle a growing array of payment options, and buy now/pay later fintechs are adding another choice to the mix — BNPL-branded cards to use in stores.

The San Francisco-based BNPL lender Affirm rolled out the Affirm Card, a physical version of its 11-year-old online instant-financing service, months after its Sweden-based BNPL rival Klarna launched its own plastic Klarna Visa. Block’s BNPL unit Afterpay also has a virtual Visa card consumers can use to pay in stores. . . .

How Regulation E Could Complicate Crypto Compliance
Law360 – September 5, 2023 (subscription required)

The pace and scope of innovation in cryptocurrency has far outstripped the regulatory structures that purport to govern it. Since the inception of cryptocurrency, regulators have focused largely on whether it constitutes a security subject to U.S. Securities and Exchange Commission authority.

This made sense when few virtual coins were used as a direct medium of exchange for goods or services, but now the industry envisions consumers using virtual currency in a wide array of transactions. . . .

Who Will Route Transactions?
Digital Transactions Magazine – September 1, 2023

The Credit Card Competition Act is back in play. But as Congress debates the bill, a pressing question looms about its biggest requirement: Who are the Visa and Mastercard alternatives supposed to be?

Senator Richard Durbin is back at it. After failing to advance the Credit Card Competition Act out of Congress last year, the Illinois Democrat has reintroduced the legislation in the new Congress. Not only is the bill generating more buzz, it enjoys more bipartisan support in both chambers. . . .

Industry Developments

SPOTLIGHT: Mastercard CEO Counters WSJ Fee Increase Story
Payments Dive – September 6, 2023

Mastercard Chief Executive Michael Miebach on Tuesday rebutted a Wall Street Journal story last week that reported the card company and its larger rival Visa would increase credit card interchange and network fees for merchants starting later this year.

The CEO delved into industry terminology during an investor presentation to suggest that the newspaper’s reporting failed to distinguish between various fees in a piece that lumped the two biggest U.S. card networks together. Mastercard made similar points in a website post Tuesday. “My headline on that headline of the Journal report is that the article is plainly wrong,” Miebach said at an investor conference hosted by the investment bank Goldman Sachs. . . .

Visa to Explore Potential Exchange Offer for Bank-Owned Shares Amid Stock ‘Overhang’
MarketWatch – September 13, 2023 (subscription required)

Visa Inc. adopted an unconventional share-class structure when it went public, and the company said Wednesday that it will discuss with shareholders whether to amend that as a means of resolving a potential overhang on the stock.

The payment-technology company, which was a bank-owned cooperative before going public in 2008, currently has three classes of stock. Visa’s A shares are owned by the public, B shares are owned by U.S. banks, and C shares are held by foreign banks. . . .

Navigating Dual Pricing With Technology-Driven Strategies
Green Sheet – September 11, 2023

As economic uncertainties and pressures continue to build, more merchants have implemented or are now considering dual pricing, cash discounts or credit surcharging as a way to attract customers and reduce their credit card processing fees. This often involves the addition of POS software features sold as value-added capabilities by their merchant service provider.

However, the guidelines surrounding these processes have recently become a subject of intense debate within the industry and government levels. Consequently, many merchants are now uncertain about what is allowed and what is not. They may be unaware of the potential implications and compliance requirements associated with these value-added capabilities. . . .

Credit Card Disputes Keep Rising at Visa as E-Commerce Booms
Bloomberg – September 11, 2023 (subscription required)

Credit card disputes at Visa Inc. continued rising past their pandemic boom despite the proliferation of prevention software, as fraud grows alongside e-commerce and inflation.

Disputes on Visa’s network rose to more than 90 million in 2022, data provided by the payment company showed. More than 70 million disputes were filed in 2019, Visa said in a presentation, before rising 24% in 2020 during the pandemic and about 2% a year in 2021 and 2022. . . .

PayPal Finally Launches Apple Pay Support for Its Credit and Debit Cards
9to5Mac – September 7, 2023

PayPal is finally rolling out Apple Pay support to its PayPal credit and debit cards. This move was first announced last year as part of a trio of ways PayPal was planning to expand its adoption of Apple Pay, alongside broader support for Apple Pay online and Tap to Pay on iPhone.

With today’s change, PayPal users who have a PayPal-branded debit or credit card can now add their card to the Apple Wallet app. This move has been a long time coming, as the vast majority of other banks and card issuers have supported Apple Wallet and Apple Pay for years. PayPal users can head to the PayPal app on their iPhone and look for a new banner on the app’s homepage that says: “Pay with your iPhone.” . . .

JPMorgan Is Exploring Blockchain-Based Deposit Token for Payments, Settlements
Bloomberg – September 7, 2023 (subscription required)

JPMorgan Chase & Co. is in the early stages of exploring a blockchain-based digital deposit token for speeding up cross-border payments and settlement, according to a person familiar with the work.

The US’s biggest bank by assets has developed most of the underlying infrastructure needed to run the new form of payment, but wouldn’t create the token unless the project is approved by US regulators, according the person, who asked not to be named because the matter is private. The bank may launch the product for use by corporate clients less than a year after it receives a go-ahead, the person said. . . .