Legal and Regulatory Developments

SPOTLIGHT: A Senate Panel Sends a Signal: Time to Cut a Deal on Swipe Fees
Digital Transactions News – November 20, 2024 

Members of the Senate Judiciary Committee told representatives of Visa Inc., Mastercard Inc., and the merchant community on Tuesday it was time to “negotiate” an end to their decades-old dispute over credit card swipe fees.

The comments came during a Senate Judiciary Committee hearing billed as “Breaking the Visa-Mastercard Duopoly: Bringing Competition and Lower Fees to the Credit Card System.” The committee is chaired by Sen. Richard Durbin, D.-Ill., co-sponsor of the Credit Card Competition Act.

If a solution to the ongoing dispute over swipe fees does not emerge, committee members warned, Congress will settle the dispute, and neither party will like the outcome. “Get in the room and solve the problem, because I’ll guarantee you the solution coming from Congress won’t be good for anyone,” said Republican Sen. Thom Tillis of North Carolina. . . .

CFPB Expands Oversight of Digital Payments Services Including Apple Pay, Cash App, PayPal and Zelle
CNBC– November 21, 2024

The Consumer Financial Protection Bureau on Thursday issued a finalized version of a rule saying it will soon supervise nonbank firms that offer financial services likes payments and wallet apps.

Tech giants and payments firms that handle at least 50 million transactions annually will fall under the review, which is meant to ensure the newer entrants adhere to the laws that banks and credit unions abide by, the CFPB said in a release.

The CFPB said that seven nonbanks qualify for the new scrutiny. That would include payments services from Apple, Google and Amazon,
as well as fintech firms including PayPal and Block and peer-to-peer services Venmo and Zelle. . . .

State Interchange Fee Legislation Makes Meager Progress
Payments Dive – November 18, 2024

Illinois may have been the first state to pass a law requiring the elimination of tax from the calculation of card interchange fees, but several other states have made at least one step in the same direction.

In Pennsylvania, a similar bill was introduced earlier this year and passed by that legislature’s House Finance committee in June before being tabled in September. A similar bill was also introduced in both chambers of the Tennessee General Assembly last year, but made little headway this year.

In the meantime, the state of Illinois was sued by a group of bankers in August who are seeking to overturn the state law, which is scheduled to take effect next year. That case is making its way through federal court, with U.S. Sen. Dick Durbin backing the law and the Office of the Comptroller of the Currency arguing against it. . . .

Industry Developments

SPOTLIGHT: Why Visa’s Making It Easier to Access a Credit Card Alternative
American Banker – November 20, 2024 (subscription required) 

Even though buy now/pay later is a rival product to credit cards, Visa and Mastercard have both embraced installments, with Visa adding BNPL fintech Affirm as the card brand’s initial U.S. partner for Visa’s Flexible Credential, a product that enables consumers to use a single card account for different payment options.

The popularity of BNPL has left the credit card industry with little choice but to offer installments as a way to protect long-standing relationships with card issuers and merchants.

Forty seven percent of consumers say BNPL has allowed them to make a purchase, with 60% of Gen Z and 66% of millennials saying they are likely to use BNPL in the future, according to research from American Banker, which notes that BNPL has become one of the biggest reasons why legacy banks are losing market share to fintechs. And for merchants, offering BNPL can boost sales by 20%, according to a new academic paper from researchers affiliated with the National Bureau of Economic Research. . . .

PayPal CEO Pushes Beyond Payments
Payments Dive – November 20, 2024

PayPal CEO Alex Chriss leads what may be the best known digital payments brand in the world, but he’s ready to move beyond that legacy.

PayPal solved the electronic payments problem long ago, and a pack of copycat competitors have made the business passé, he says. So, a year after taking the San Jose, California company’s top post, Chriss has set his sights higher: on making PayPal into the ultimate match-maker between merchants and consumers.

“We are going from what people thought of as just a payments company to really being a commerce platform, and that’s a big shift,” Chriss said in an interview last month. Chriss, 47, pictures PayPal helping merchants better pitch consumers in markets all over the world. He’s taken the first steps in that mission by remaking the management team; stirring up more innovation; and pushing the 26-year-old company to move faster, he says. . . .

Digital Wallets Help Drive Widespread Adoption of Network Tokens
PYMNTS – November 18, 2024 

No matter the application, the guiding principle behind tokenization remains the same: replacing sensitive data with a digital representation (token) that protects that data.

Recent weeks and months have seen the rise of what we might term two “tracks” of tokenization. There’s payment tokenization, and then there’s the tokenization of real-world assets (RWA). The former protects card-level details and the cardholder through a digital representation of the 16-digit card details that is without value. The latter streamlines the transfer of assets, such as stocks, bonds and real estate, between parties.

Mastercard, for example, plans to phase out the need to enter card numbers, static passwords and one-time codes when making online purchases by the end of the decade through tokenization and biometric authentication. . . .

Read Payments News Update – November 22, 2024 at constantinecannon.com