Legal and Regulatory Developments
SPOTLIGHT: Senators Grill Visa, Mastercard Execs Over Swipe Fees
The Hill – May 4, 2022
Senators on Wednesday scrutinized Visa and Mastercard for raising swipe fees on merchants, costs that they say will be passed down to consumers amid surging inflation. Senate Judiciary Committee Chairman Dick Durbin (D-Ill.), a longtime critic of the credit card giants, called for new rules to inject competition into the credit card industry and prevent “unreasonable” fees during a hearing in which Visa and Mastercard executives answered questions about the swipe fees.
“The credit and debit card systems are not competitive marketplaces,” Durbin said. “It’s a sweetheart deal for the dominant networks, for the biggest banks and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price.” . . .
Exclusive: U.S. “Open Banking” Rule Bogged Down by Privacy Concerns – Sources
Reuters – May 4, 2022
A long-awaited U.S. “open banking” rule that could dramatically boost consumer finance competition and increase Americans’ access to financial services is being held up by privacy concerns, according to five people with knowledge of the matter.
The Consumer Financial Protection Bureau (CFPB) rule would allow consumers to easily share their financial data with third-parties. This would remove a key obstacle to switching service providers that might offer lower fees. . . .
Sen. Elizabeth Warren Pushes CEOs of Three Major Banks to Kill Overdraft Fees
Los Angeles Times – May 4, 2022
Massachusetts Democratic Sen. Elizabeth Warren has called Jamie Dimon the “star of the overdraft show” because of the billions of dollars JPMorgan Chase & Co. has made from those banking fees. Now she’s telling Dimon and two of his fellow Wall Street chief executives to stop.
The senator sent letters Wednesday to Dimon, Wells Fargo & Co.’s Charlie Scharf and Bank of America Corp.’s Brian Moynihan, pushing them to follow the lead of some rivals and get rid of all fees for overdrafts. The letter was also signed by two other Democrats, Sen. Cory Booker of New Jersey and Rep. Carolyn Maloney of New York. . . .
Dutch Regulator Still Unsatisfied With Apple’s Rules
CPI – May 3, 2022
In a statement obtained by journalist Nando Kasteleijn, the Authority for Consumers and Markets (ACM) said that while Apple eliminating its requirement for Dutch dating apps to create a separate app binary in order to accept alternative payments was an improvement, the company has yet to fully comply with Dutch and European regulations. The statement did not outline the specific conditions that Apple has yet to comply with.
The ACM already fined Apple a total of €50 million between January and March for failing to comply with the order, and the competition regulator said it is now preparing a new order with additional penalties that will be published in the coming weeks. . . .
EU Antitrust Complaint Against Apple Pay Was Supported by PayPal
9to5Mac – May 2, 2022
The European Union shared a Statement of Objections earlier today in which it criticizes how Apple restricts the NFC technology on the iPhone to its own payments platform. Now a report from Bloomberg reveals that PayPal was one of the companies that supported the EU’s antitrust complaints against Apple Pay.
Citing sources familiar with the matter, the report claims that PayPal helped “spur a formal antitrust complaint” against Apple and Apple Pay with the European Commission. PayPal, which offers an NFC-based “tap-to-pay” feature for Android users, is not allowed to offer the same option on the iPhone. . . .
Federal Reserve Onboards First Participants in FedNow Pilot, Including Square
PYMNTS – May 2, 2022
The Federal Reserve has started onboarding the first participants to the FedNow Service pilot program, beginning the instant payment service’s initial testing phase, according to a Monday (May 2) press release emailed to PYMNTS. FedNow is on track to roll out next year.
Over 120 organizations are taking part in the program, and some have already had success connecting to the test version of the service and delivering trial messages, the release stated. . . .
European Central Bank Begins Exploring User Interfaces for Digital Euro Payments
PYMNTS – May 2, 2022
The European Union (EU) will be moving ahead with its digital euro investigation, including exercises on how people will interact and pay with the digital coin if it is adopted.
The European Central Bank (ECB) put out a call for payment service providers, banks and various other relevant companies, with an exercise to make prototypes for user interfaces to work with the digital euro. The chosen front-end provider companies will be a part of a pool who will work with the ECB on various issues surrounding digital euro payments going forward. . . .
As Congress Weighs Digital Wallet Regulation, Focus Turns to Electronic Cash Proposal
The Block – April 29, 2022
As Congress weighed US rules for digital wallets on Thursday, lawmakers were particularly keen on the roles of data privacy and consumer protections.
The hearing focused heavily on Representative Stephen Lynch’s (D-MA) new ECASH bill. Introduced at the end of March, the bill calls on the Treasury to put out digital hardware that offers a user experience that’s as much like cash as possible. In practice, this would mean full privacy, and would bar a ledger of any kind. . . .
Industry Developments
SPOTLIGHT: BNPL Players’ Losses Grow as Costs Soar
Payments Dive – May 3, 2022
Buy now-pay later providers are having to pay a hefty price to keep up with surging consumer demand for their financing services, spending large sums to add new technology and more employees.
In 2005, three Swedish entrepreneurs, Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson, decided to see if their installment payment loan service, then called Kreditor Europe and now called Klarna, would attract the attention of investors attending a Shark Tank-like contest in Stockholm. . . .
Cryptocurrency and Its Role in Retail
NRF – May 4, 2022
Cryptocurrency can feel like another language, but we’ve been here before. If you’re a business owner in the 1990s, you remember being urged to put up a website. It seemed like a potential waste of time: If a customer wanted to find you, they could use a phone book.
Apps, artificial intelligence, delivery services — plenty of other developments have come down the pike that might have seemed unnecessary until suddenly it was obvious they were a benefit to a business. . . .
Fiserv to Offer Merchant Clients Affirm’s BNPL Service
PYMNTS – May 4, 2022
Buy now, pay later (BNPL) network Affirm and payment provider Fiserv are partnering to make Affirm available to Fiserv’s enterprise merchant clients, the companies said in a press release Wednesday (May 4). The partnership, set to go into effect later this year, makes Affirm the first BNPL provider fully integrated into Fiserv’s Carat operating system.
The companies said the integration will let Fiserv’s merchant clients add Affirm’s Adaptive Checkout function, which offers biweekly and monthly payment options to allow customers to choose how they want to split costs. . . .
Behind the Clearing House’s Effort to Bring Tokenization to Its Real Time and ACH Services
Digital Transactions News – May 4, 2022
Against a background of emerging real-time payments and steady growth in automated clearing house transactions, The Clearing House Payments Co. LLC is working to mask those transfers with a technology the payment card business has used for years—tokenization. The job is enormous. “We’re just starting—it’s going to take time,” says Jeff Williams, a senior vice president at New York City-based TCH.
The new effort, which has been in the works for some time but was officially announced Monday, is aimed at replacing deposit-account and routing numbers with strings of digits that would be useless if intercepted by thieves. . . .
Fraud Is Down, but More Expensive
American Banker – May 4, 2022
After increases in fraud reports in 2020 and 2021, recent data suggests the fraud rate impacting a large swath of the economy decreased at the beginning of 2022, nearing prepandemic levels. However, the total amount of money lost to fraud continues to climb.
The findings from TransUnion, the Federal Trade Commission, and data analysis company LexisNexis Risk Solutions suggest fraud attempts increased with the start of the pandemic but may be receding. At the same time, fraudsters are stealing more from victims with each attempt. . . .
How Have U.S. Card Fees Grown Since 2006?
CMSPI Blog – May 3, 2022
The Senate Judiciary Committee hearing on “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems” is May 4, 2022, with both Visa and Mastercard testifying.
The last hearing on this issue with both Visa and Mastercard testifying was on July 19th 2006 – nearly 16 years ago. With credit card swipe fees still rising despite the introduction of measures to increase competition in the debit card market in 2011, we address the fundamental question: how much has been paid in U.S. Visa and Mastercard interchange fees since the 2006 hearing? . . .
The Next Big Visa-Mastercard Rival Is…Zelle?
Digital Transactions Magazine – May 1, 2022
Is the Zelle peer-to-peer payments network soon going to the point of sale? That’s the big question raised by payments-industry experts after The Wall Street Journal reported in April that Bank of America Corp. and Wells Fargo & Co.—two of the seven big financial institutions that own Early Warning Services LLC, operator of the Zelle network—are lobbying to expand the service to retail payments.
At issue is whether the financial institutions can leverage the expansion of Zelle to retail payments to avoid restrictions on debit card fees imposed on big banks by the 11-year-old Durbin Amendment, payments industry experts speculate. . . .
A Chip Crisis Is Looming for Payment Cards
American Banker – April 29, 2022 (subscription required)
Much of the focus on the microchip shortages has been on automobile manufacturing and consumer electronics, but payment cards and point-of-sale devices are also under greater strain from Russia’s war in Ukraine and China’s lockdowns.
“This is a global challenge. Everyone we speak with is dealing with the same issue,” said Jason Bohrer, president and CEO of Sentry Interactive, an Austin, Texas, workplace automation company. Bohrer is executive director of the U.S. Payments Forum, based in Englewood, Colorado. . . .
– For questions about this newsletter or its content, contact Kristian Soltes @ ksoltes@constantinecannon.com.
Read Payments News Update – May 6, 2022 at constantinecannon.com
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