C|C Payments Weekly News Update
March 6, 2019
Legal and Regulatory Developments
SPOTLIGHT: Will ‘Open Banking’ Sizzle or Fizzle in the U.S.?
The Financial Brand – February 27, 2019
In the U.S., open banking may not yet be law like it is in the U.K., but its impact will continue to ripple across the pond. Here’s how experts say the concept will affect banking providers worldwide, including American institutions.
Open banking allows third-party developers to build applications and services that plug into the technology backbone of a traditional financial institution. Using open-source technology and APIs, third-parties can build new financial tools leveraging private customer data that was previously inaccessible. This is why — in theory, at least — open banking promises to accelerate innovation, thereby giving consumers more options and greater convenience. . . .
Russia’s Trade Assoc. Accuses Visa, Mastercard of Market Power Abuse
PYMNTS – March 1, 2019
Russia’s trade associations have accused Visa and Mastercard of abuse of market power in the country. According to RT.com, the Association of Internet Trade Companies, the Retail Companies Association (ACORT) and the Association of Trading Companies and Manufacturers of Electrical Household and Computer Equipment filed a request to the country’s antitrust authority to take action against both credit card giants.
Reports state the complaint is focused on interchange fees – the amount paid by the lender servicing a trade outlet to the lender that issued the card. Russia’s trade association pointed out that those fees make up 70 percent of what most merchants pay for accepting credit cards. . . .
Don’t Count on Visa and Mastercard Winning in China
Barrons – March 1, 2019 (subscription required)
One Chinese concession that looks likely in trade talks with Washington, D.C., is easing entry for the U.S. credit-card giants that have been knocking on Beijing’s door since it joined the World Trade Organization in 2001.
The gates have already opened a crack, with new Chinese joint ventures for Mastercard (ticker: MA) and American Express (AXP). “I expect a breakthrough on market access for electronic-payments services,” says Scott Kennedy, director of the Project on Chinese Business at the Center for Strategic and International . . .
UK Retailers Press for Commercial Card Interchange Fee Caps
PYMNTS – February 27, 2019
The European Union’s (EU’s) battle against U.S. card company interchange fees reached new levels earlier this year when the European Commission (EC) issued a $648.3 million fine against Mastercard for its swipe fees, which regulators said drove up prices for retailers and consumers, and hampered competition.
It marked the latest chapter in a long-standing saga, as the European Commission and U.K. Payment Systems Regulator (PSR) continue their probes into competition of the card-acquiring space, with Mastercard and Visa offering late last year to cut swipe fees on tourist cards to help end the EC’s investigation. . . .
EU Weighs New Rules on Payments in Challenge to Visa, Mastercard
Reuters – February 26, 2019
BRUSSELS (Reuters) – The European Commission is considering new rules to speed up the take-up of an instant payment system launched last year by the European Central Bank in a direct challenge to card firms and tech giants, like PayPal, a top official said.
The ECB’s TARGET Instant Payment Settlement (TIPS) system will let people and companies in Europe transfer euros to each other within seconds and regardless of the opening hours of their local bank[.] This is seen as a direct challenge to U.S. firms like PayPal, Google, Facebook and Amazon, and China’s Alibaba and Tencent which currently dominate such services in Europe. . . .
Network Fee Boosts Are Taking a Big Bite out of Merchants’ Durbin Savings, Research Says
Digital Transaction News – February 25, 2019
A bevy of fees levied by the two major card networks is offsetting much of the fee relief merchants receive from the 7-year-old Durbin Amendment, according to new findings from a payments-research firm that is studying the issue on behalf of the retail industry.
While the Durbin caps on debit card interchange fees for big banks should have delivered $9.37 billion in annual savings based on total estimated debit volume this year, the yearly benefit net of new fees and fee boosts from Visa Inc. and Mastercard Inc. is actually $4.6 billion, or less than half what merchants might have expected to reap, estimates CMS Payments Intelligence Ltd., which maintains offices in Manchester, United Kingdom, as well as Atlanta and specializes in data on merchant-acceptance costs. . . .
Industry Developments
Levchin: Why the Affirm-Walmart Partnership Is More than POS Credit
PYMNTS – March 4, 2019
As we learned last week, purchase financing for Walmart customers is changing. In fact, the change has already begun and will continue to roll out over the next several weeks. Going forward on both Walmart’s website and at all of Walmart’s physical locations nationwide, customers will be given the option to finance their purchases of over $150 (and capped at $2,000) via Walmart’s newest partner — point-of-sale (POS) lending company Affirm.
Affirm Founder and CEO Max Levchin told Karen Webster in a conversation shortly after the news was announced that it is undeniably a big stage upon which to step. With a 140 million weekly shoppers, a physical location within 15 minutes of 95 percent of the U.S. population and a toehold with nearly every imaginable demographic segment, Walmart is — more or less — the definition of scale in U.S. retail. . . .
Crypto Companies Complain They’re Being Shunned by Most Banks
American Banker – March 4, 2019
The gatekeepers of mainstream commerce are keeping their doors shut to cryptocurrency companies.
Entrepreneurs in the digital-assets industry from New York to Hong Kong say that even as some attract investment from multibillion-dollar institutions like Singapore’s sovereign wealth fund, they are routinely refused basic banking services by the likes of HSBC and JPMorgan Chase. . . .
Kroger Plans to Widen Its Ban on Visa Cards, Citing ‘Excessive’ Fees
Bloomberg – March 1, 2019 (subscription required)
Kroger Co., the biggest U.S. supermarket chain, plans to widen a ban on Visa Inc. credit cards to its Smith’s food and drug division, blaming rising costs from premium cards.
Starting April 3, Smith’s stores won’t accept Visa credit cards, though customers can still use their Visa debit cards, the company said Friday in a statement. The ban follows Kroger’s decision in July to stop accepting Visa credit cards at its Foods Co. Supermarkets unit in California. . . .
The ‘Existential Threat’ Cryptos Pose to Traditional Payments Systems ‘Bears Watching,’ Says Expert
MarketWatch – March 1, 2019
Although the idea that cryptocurrencies will overthrow incumbent payment systems might seem far-fetched to most, according to one payments expert, it is a scenario that crypto-skeptics shouldn’t dismiss.
In a research note titled, “V, MA, PYPL: Not Imminent, but Worth Watching — the Risk of Disruption from Cryptocurrencies and Blockchain,” Lisa Ellis, an analyst at MoffettNathanson tracking the rapidly evolving payments sector, said nascent digital coins aren’t a fad. . . .
Wearables Forge New Payment Partnerships, See Strong Demand
Mobile Payments Today – February 28, 2019
Consumer demand for smartwatches and other payment-enabled wearables is continuing to increase as traditional watch companies are working with mobile technology developers to expand the reach of these new devices.
Timex Group earlier this week announced a deal with Hong Kong-based Tappy Technologies to use the company’s tokenization chips, which allow users to convert a standard watch into a digital payment device. . . .
Goldman-Apple Credit Card Will Yield Game-Changing Consumer Data
PaymentsSource – February 27, 2019
One Chinese concession that looks likely in trade talks with Washington, D.C., is easing entry for the U.S. credit-card giants that have been knocking on Beijing’s door since it joined the World Trade Organization in 2001.
The gates have already opened a crack, with new Chinese joint ventures for Mastercard (ticker: MA) and American Express (AXP). “I expect a breakthrough on market access for electronic-payments services,” says Scott Kennedy, director of the Project on Chinese Business at the Center for Strategic and International . . .
Amazon, Accenture and Mastercard Take Digital ID to Supply Chains
PaymentsSource – February 26, 2019
Amazon, Accenture and Mastercard are using digital identity, blockchain and mobile payments to crack a window into sustainability and inclusion, but they’re also gaining potential retail benefits by capturing consumers who crave information about the origin of products.
The companies are pushing a “circular” supply chain that can directly reward sustainable practices of small-scale growers and suppliers. Amazon Web Services, Mastercard, Everledger and Mercy Corps are rounding out a team that wants to connect the “first mile” and “last mile” with a visual record that is traditionally not available—consumers don’t usually have easy point of access to the detailed growing practices of farmers behind the product in a store or online. . . .
Jamie Dimon Says JP Morgan’s New Cryptocurrency Could One Day Be Used by the Consumer
CNBC – February 26, 2019
Jamie Dimon hinted at J.P. Morgan Chase’s annual investor day that the bank’s new cryptocurrency could one day be used for retail payments. “JP Morgan Coin could be internal, could be commercial, it could one day be consumer,” Dimon, 62, said during a question-and-answer session.
Earlier in February, J.P. Morgan became the first major U.S. bank to create its own cryptocurrency with the launch of “JPM Coin.” The digital token was designed to settle transactions between clients of its wholesale payments business, specifically for international payments and securities transactions that migrate to the blockchain. . . .
Integrated Payments Bring Fees, But Boost Overall Sales
PaymentsSource – February 25, 2019
If you had a choice between eating a higher payment processing fee or losing some customers to cart abandonment, which would you choose? While the math is complicated the bottom line is you should integrate payments or risk losing some sales.
When e-commerce websites decide between using their own payment form or integrating with services like PayPal and Venmo, they face that dilemma. It’s a difficult choice because no one wants to do the math. I did it, and yes, it’s messy. . . .