Payments News Update -- April 17, 2019

Legal and Regulatory Developments

SPOTLIGHT: Appeals Court Revives £14B Mastercard Class Action
Law360 – April 16, 2019

An appeals court in London on Tuesday revived a £14 billion ($18.3 billion) proposed class action lawsuit accusing Mastercard of flouting European Union competition law by charging consumers high credit card fees, in a test of the U.K.’s fledgling class action regime.  The Court of Appeal unanimously overturned a ruling by a lower tribunal, which found in 2017 that there was too great a disparity in the swipe fees that merchants passed along to consumers to allow the action to proceed en masse. . . .

Amex Settles Anti-Steering Case with Merchants
MLex – April 12, 2019 (subscription required)

Merchants including CVS, Albertson’s and Walgreen have stipulated to the dismissal of their claims against American Express over its anti-steering rules. The dismissal comes after the parties reached an undisclosed settlement agreement. . . .

How a No-Deal Brexit Makes Payments More Pricey
PaymentsSource – April 10, 2019

With the U.K. government still at stalemate over Brexit, the prospect of leaving the European Union without a deal remains a very real possibility. Despite some recent agreements, this could have major implications for the U.K. payments industry. . . .

China, Home to the World’s Biggest Cryptocurrency Mining Farms, Now Wants to Ban Them Completely
South China Morning Post – April 9, 2019

China’s top economic planning body has proposed new rules that would see the closure of all local cryptocurrency mining facilities if enacted – a move that would potentially end the country’s dominance in the energy-hungry, yet lucrative industry. The National Development and Reform Commission (NDRC) on Monday unveiled amendments to its guidance for adjustments to the nation’s industrial structure, including categories that are encouraged, restricted and eliminated. Cryptocurrency mining was included among sectors to be eliminated immediately. The new list is under public consultation until May 7. . . .

New Rules Clear the Runway for Bank-led Crypto Payments
PaymentsSource – April 9, 2019

While virtual currencies have been “on the list” of banks for years, to date most have taken a hands-off approach. This is now changing. Some of the larger financial institutions are beginning to formalize their positions. And, thanks to a combination of factors such as regulation, now is a good time for banks everywhere to follow suit and move the strategic evaluation of this market higher up the priority list. So, what are the factors at play and what do banks need to know about virtual currencies to enable them to form a clear, long-term strategy? . . .

Retailers Riled Up About Regulated Debit Interchange as Authorization Costs Decline
Digital Transactions News – April 9, 2019

A prominent merchant group says that in the face of declining authorization, clearing, and settlement costs, it is time for the Federal Reserve to lower its regulated debit card interchange rate. The Retail Industry Leaders Association issued its call after the Fed last month released its latest bi-annual study of the debit card market, as required by the Durbin Amendment to 2010’s Dodd-Frank Act. The new study, for the year 2017, says average per-transaction authorization, clearing, and settlement costs for regulated debit card issuers, excluding their fraud losses, fell to 3.6 cents in 2017—a cumulative decline of 54% percent since the Fed began collecting such data in 2009. . . .

Industry Developments

Mastercard Redefines Choice at Checkout with Acquisition of Vyze
Business Wire – April 16, 2019

Mastercard (NYSE: MA) today announced it has acquired Vyze, a technology platform that delivers more choice – and purchasing power – to people who want their point-of-sale payment options to match the flexibility and convenience of today’s shopping experiences. Increasingly, consumers are seeking alternative financing options, leaving merchants and financial institutions with a need to deliver these services at the point of sale. In the U.S. alone, these solutions represent a more than $1.8 trillion opportunity, according to Accenture. . . .

PSD2: It’s Time for Digital Banking and E-Commerce to (F)innovate
Forbes – April 15, 2019

Like many recent inventions, digital banking and e-commerce have made our lives substantially better. Designed to save time and money, they’ve empowered consumers, created thriving marketplaces and allowed businesses to embrace asset-light business models. Open banking was quick to follow, allowing consumers to benefit from better deals, access to new products and services, and to have better control over their money. But convenience breeds complacency. These time-saving innovations have started exposing consumers and businesses to previously unknown risks – and little has been done to secure online spaces, until recently. . . .

Mastercard Calls for Unity as It Prepares for Digital ID
PaymentsSource – April 15, 2019

Mastercard is calling for a global consumer digital identity bill of rights to be adopted by businesses, governments and regulators as it prepares to launch a digital ID management service later this year. A recently released white paper by Mastercard outlines 10 fundamental principles digital identities. The bill of rights, as proposed by Mastercard, puts consumers in control of their identity, allows them to consent to who is able to access their identity as well as what is shared, governs identity interactions and calls for companies to hold any identity accessed to the highest levels of security and to use them only for legitimate, fair purposes. . . .

The Payments M&A Wave Could Hit Debit Networks Next
PaymentsSource – April 15, 2019

As major payments M&A deals mount, some free agents are awaiting deals of their own — and one area where that’s most apparent is in debit and ATM networks. The combination of FIS and Worldpay and Fiserv and First Data are mashups of card issuing and merchant acquiring services that are designed to eliminate the need for companies to have distinct vendor relationships for both functions. In addition to creating new avenues for open banking, generating data for incentive marketing, and providing a boost to automate supply chain transactions, the deals also bring together large ATM and debit networks that currently compete with each other and serve as a competitive alternative to Visa and Mastercard. . . .

Contactless Cards are Just Catching on in the US – Years After the Rest of the World
CNBC – April 12, 2019

• The U.S. lags behind many countries in the world when it comes to making contactless payments.
• Contactless technology allows customers to pay by tapping their cards directly onto a store’s checkout terminal.
• Banks and card issuers have an incentive to make contactless more widespread.

For many foreign tourists visiting the U.S., checking out at the register feels like a trip back in time. . . .

Visa to Lower Its Chargeback and Fraud Ratios for Merchants in October
Digital Transactions News – April 11, 2019

Visa Inc. will lower its merchant dispute and fraud ratios in October. Merchants that exceed the revised ratios could be placed in monitoring programs meant to control risk. Visa hasn’t announced the new standards publicly, but has informed the merchant-acquiring community. Digital Transactions News obtained some of the key new threshold standards from chargeback and fraud-prevention service providers. Visa’s Chargeback Monitoring Program has two major components. Lower-risk merchants currently are placed in the program if they have 100 or more disputed transactions per month and a dispute to transactions ratio of 1%. The new standard effective Oct. 1 retains the threshold at 100 disputes, but lowers the ratio to 0.9%. . . .

Coinbase and Visa are Making Bitcoin, Ethereum, Ripple’s XRP, and Litecoin Payments a Reality
Forbes – April 10, 2019

Bitcoin and other major cryptocurrencies, including ethereum, Ripple’s XRP, and litecoin, have long struggled against accusations they are harder to spend and use in the real world than their traditional fiat counterparts. The bitcoin price, which leaped higher last week to trade around $5,000 per bitcoin, has been called too unstable and volatile to be used as a means of payment, resulting in bitcoin and other cryptocurrencies being used more of a store of value, like gold, than traditional means-of-exchange currency.  Now, major bitcoin and cryptocurrency exchange Coinbase has teamed up with global payments processor Visa to try to change that, launching the Coinbase Card which allows users to “spend crypto as effortlessly as the money in their bank.”. . . .

Community Bankers Alarmed After Big Banks Backtrack on Faster-Payments Pricing
PaymentsSource – April 10, 2019

Two and a half years ago, the big-bank consortium that was preparing to launch a real-time payment system told the Department of Justice that it would charge the same price to all depository institutions, regardless of their size. “Put differently, there will be no volume discounts that would benefit larger banks,” a lawyer for The Clearing House wrote in October 2016. Nearly a year later, the Justice Department cited that assurance when it told The Clearing House that it had no intention to take an antitrust action against the consortium’s real-time payments, or RTP, network. But last month, The Clearing House added a big caveat to its pledge: Its commitment to charge the same prices to banks of all sizes will now only apply as long as it is the sole U.S. operator of a real-time payment system. . . .

Amazon Go Stores to Accept Cash, Eventually
Digital Transactions News – April 10, 2019

Amazon Go stores may soon accept cash. “We are working to accept cash at Amazon Go,” an Amazon spokesperson confirms in a statement to Digital Transactions News. Amazon Go stores only accept in-app payments now. A consumer must download the Go app and scan a barcode from the app on her phone’s screen upon entering the store. Every time a shopper places an item in her physical basket, it is recorded in a virtual shopping cart assigned to her upon entering the store. . . .

The Latest AFP Fraud Study Unveils a Surprising Jump in Fraud on the ACH
Digital Transactions News – April 10, 2019

Which payment method holds the dubious distinction of racking up the fastest growth in fraud last year? According to the latest annual fraud report from the Association for Financial Professionals, it’s debits and credits on the automated clearing house network. In fact, the ACH was the only payment method examined in the report that registered an increase in fraud in 2018. Some 33% of responding organizations said they had been the victims of actual or attempted fraud on ACH debits last year, up from 28% in 2017. Meanwhile, 20% reported being the targets of ACH credit fraud, up markedly from 13%. Surprised? So was Magnus Carlsson, manager for treasury and payments at the Bethesda, Md.-based AFP, a trade group for financial managers in a wide variety of industries. . . .

Blockchain Might Not Solve Chargeback and Ecommerce Fraud
The Green Sheet – April 8, 2019

Is blockchain technology the way to fight chargebacks and chargeback fraud for ecommerce retailers? This question is becoming more important as we look for ways to secure ecommerce transactions, which continue to grow exponentially each year. With more transactions, the likelihood of additional chargebacks, including fraudulent claims, increases. But is blockchain the answer?  Some have hailed the emergence of blockchain as a way to secure ecommerce transactions in a time when massive breaches have exposed countless individuals to cyber criminals. However, before we put all our eggs in the blockchain basket, we need to examine whether the technology is ready to protect merchants from chargebacks and fraud. . . .