Legal and Regulatory Developments

SPOTLIGHT: Buy Now, Pay Later Users Pile on Debt, CFPB Finds
Payments Dive – January 14, 2025

Nearly two-thirds of consumers in the U.S. who lean on buy now, pay later transactions to pay for goods and services take out multiple BNPL loans at once, the Consumer Financial Protection Bureau concluded in a study released Monday.

Most people who use BNPL as a payment method also carry disproportionately large amounts of other types of debt such as credit card and personal debt, the bureau’s research showed.

The majority of consumers who use BNPL (61%) have subprime or deep subprime credit scores, the report found. A FICO score between 580 and 619 is considered subprime, whereas a FICO score below 580 is considered deep subprime, according to the CFPB. . . .

Where Payments Law and Regulation Are Headed in 2025
Law360 – January 13, 2025 (subscription required)

Political headwinds are quickly reshaping the 2025 payments outlook. Throughout 2024, Congress and the federal banking agencies focused on obtaining data and information about third-party banking-as-a-service providers and digital payment service providers, with the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corp. seizing on the involvement of fintechs and other new technologies to promulgate new rules and policy initiatives.

Now, the incoming administration will likely bring significant changes to fintech and consumer financial regulations. President-elect Donald Trump is expected to replace leadership of the financial regulatory agencies, and in the final weeks before the change in administration, federal agencies have sought to balance advancing key priorities as Trump takes office against the risk of those initiatives being reversed. . . .

CFPB Seeks Public Comment on Consumer Protections Regarding Emerging Payments
PYMNTS – January 10, 2025

The Consumer Financial Protection Bureau (CFPB) is seeking public comment on how existing laws apply to emerging consumer payment mechanisms offered through tech companies and video gaming platforms as well as to stablecoins and other digital currencies.

“When people pay for their family expenses using new forms of digital payments, they must be confident that their transactions are not tainted by harmful surveillance or errors,” CFPB Director Rohit Chopra said in a Friday (Jan. 10) press release. “The CFPB is seeking public input on how to apply longstanding consumer and privacy protections to new and emerging payment mechanisms.”

One notice for public comment published by the CFPB requests information about how companies that offer consumer financial products or services manage consumers’ personal financial data, according to the release. . . .

Crypto Litigation Brought Against the SEC and the Implications of a New Administration
Reuters – January 10, 2025

As discussed in our prior columns, the Securities and Exchange Commission (SEC) has pursued a multitude of enforcement actions concerning the purchase and sale of crypto assets. These matters have expanded to encompass a broad swath of activity and have engendered substantial uncertainty and criticism from members of the digital asset industry and beyond.

Now, some states, nonprofits and industry participants have begun to proactively file lawsuits against the SEC seeking injunctive and other relief relating to a host of securities-related issues. The impact of these suits remains to be seen.

There could also be seismic shifts in the SEC’s enforcement agenda with the change in administration. Current SEC Chair Gary Gensler has announced that he will step down on Jan. 20, 2025, and President-elect Trump has since chosen former SEC Commissioner Paul Atkins to lead the agency. . . .

India’s Digital Payments Strategy Is Cutting Out Visa and Mastercard
TechCrunch – January 9, 2025

As digital payments morph into strategic assets, India is offering a template for other nations seeking to reduce dependence on Western payment networks.

Regulators around the world are notching up scrutiny on Visa and Mastercard over the fees they charge merchants, but India has chosen a different path: creating rival payment networks that are increasingly sidelining international card networks.

India’s strategy builds on the Unified Payments Interface, known as UPI, a nine-year-old system that lets consumers and merchants bypass traditional card networks by connecting bank accounts directly through QR codes and phone numbers. . . .

Expecting a CCCA Revival, Opponents Spell Out the Bill’s Economic Impact
Digital Transactions News – January 9, 2025

Opponents of the proposed Credit Card Competition Act expect the bill will be reintroduced in Congress, so the Electronic Payments Coalition launched a pre-emptive strike late Wednesday with a report detailing the bill’s potential economic impact.

The study, conducted by Oxford Economics Research, claims the CCCA’s impact on the U.S. economy four years after passage would be a drop of $227 billion in discretionary consumer spending and the loss of 156,000 jobs.

First introduced in July 2022 and again in June the following year, the CCCA did not come up for a vote in either session of Congress. Opponents like the EPC and advocates including merchant organizations expect the legislation will be reintroduced in the current Congress, which was seated Jan. 3. The bill proposes to reduce merchants’ credit card acceptance costs by requiring a wider choice of networks for processing. Financial institutions with $100 billion or more in assets would be required to enable at least one network other than Visa o Mastercard. . . .

Industry Developments

SPOTLIGHT: Card Fraud Losses Will Increase Over Next Decade
Payments Dive – January 15, 2025

Fraud losses in card payments will keep rising over the next decade, culminating in $403.88 billion of losses worldwide over the next ten years, industry research firm Nilson Report predicted this month.

The U.S. will be particularly hard hit mainly in transactions where the card is not present, such as in e-commerce payments, according to a Nilson press release earlier this month. That payments category is the most fraught in regions all over the world, Nilson said.

“Criminals from outside the US do business inside the US because American merchants and card issuers are reluctant to impose the strictest fraud fighting technologies,” Nilson Report Publisher David Robertson said in the Jan. 6 release. . . .

Fraud Epidemic Pressures Banks to Reconsider Static Card Security
American Banker – January 14, 2025 (subscription required)

As card-not-present fraud plagues the payments industry, dynamic CVVs could become a more important fraud-fighting tool.

Instead of a static three- or four-digit card verification value on the back or front of a payment card, dynamic CVV technology creates a new code periodically, making the card harder to steal. This helps offer greater protection against unauthorized purchases.

“It makes it almost as secure as EMV [chip cards], if not the same,” said Itai Sela, president and chief executive of B2 Payment Solutions and an officer on the U.S. Payments Forum’s Steering Committee. . . .

Guidelines Emerge for Adding Send Capabilities for Instant Payments
Digital Transactions News – January 14, 2025 

The U.S. Faster Payments Council has released fresh guidelines to help financial institutions add send capabilities to their instant-payments functions, a component just as critical as the ability to receive fast transfers.

Among the pieces of the “Guideline.02: Operational Considerations for Instant Payments Send-Side Primer” are items explaining the instant-payment send flow, elements to keep in mind for the user interface, real-time reconciliation, staffing, fraud mitigation, and compliance programs, among others.

Why is the sending end of instant payments important? Not as many banks and credit unions have enabled send as have adopted receive, with only between 30% and 40% of FIs expected to enable sending instant credits by 2028, according to an October report from the U.S. Faster Payments Council. In comparison, in the survey of 25 core banking providers and payments processors, between 70% and 80% of all FIs will be enabled to receive by 2028. . . .

JPM to Offer Payment Terminals With Biometric Authentication
PYMNTS – January 13, 2025

J.P. Morgan Payments has unveiled two new proprietary payment terminals that integrate in-store biometric authentication with payment capabilities.

The terminals — a payment tablet called J.P. Morgan Paypad and a payment pin pad called J.P. Morgan Pinpad — are scheduled to be released in the United States in the second half and rolled out internationally after that, the company said in a press release emailed to PYMNTS. The new hardware will join J.P. Morgan Payments’ full-stack omnichannel solution that is designed for businesses of all sizes, according to the release.

The J.P. Morgan Paypad and Pinpad will enable merchants to accept payment methods like chip, contactless, swipe, QR code and biometric authentication, the release said. . . .

Read Payments News Update – January 17, 2025 at constantinecannon.com