Payments News Update - May 21, 2020
Legal and Regulatory Developments
SPOTLIGHT: Retailers and Wholesalers Call for Urgent Amendment of Card Fees Regulation
Finextra – May 18, 2020
EuroCommerce Director-General Christian Verschueren today pressed the European Commission to act on the growing problems facing retailers and wholesalers resulting from the limited scope of the Interchange Fee Regulation (IFR).
He asked for firm proposals to amend the legislation as a follow-up to the Commission report into the application of the IFR, due to be published in the coming weeks: “We have consistently supported the Commission in its action over the years on interchange fees for credit and debit cards, and in producing the Regulation adopted 5 years ago. This has worked well in reducing consumer interchange fees. But its limitations are beginning to show – other fees have substantially increased, as have fees for unregulated cards, which most merchants have no choice but to accept. With strong evidence of fees rising steeply, we are today asking for the Regulation to be amended to allow the Commission to address actions which directly undermine its objectives.” . . .
Unprecedented Challenges: How Freshfields Managed the £14B Mastercard Case Under Lockdown
Law.com – May 20, 2020
A lead partner on the high-profile dispute describes how his firm managed the Supreme Court virtual hearing in the face of the disruption brought about by the COVID-19 pandemic.
The closely-watched Mastercard dispute is one of the biggest pieces of litigation in recent years. . . .
French Regulator Eyes Tech Giants’ Impact On Digital Banking
Law360 – May 20, 2020 (subscription required)
France’s antitrust watchdog announced plans Wednesday to scrutinize the fintech industry and said it will be looking into what impact tech giants including Apple and Google are having on digital payments.
The Autorité de la concurrence is seeking feedback from the industry as well as the public on how markets have evolved, the power of different companies and possible competition concerns. The watchdog is also interested in developments of cloud and blockchain technology, and e-wallets and crypto-assets. . . .
A Rogue First Data ISO Will Cost Fiserv $40 Million in a Proposed Settlement With the FTC
Digital Transactions – May 19, 2020
Fiserv Inc. and the former head of an independent sales organization will pay $40.2 million to settle charges brought by the Federal Trade Commission stemming from alleged illegal actions committed by the ISO from 2012 to 2014 while it obtained processing services from First Data Merchant Services, whose parent company Fiserv acquired last year.
The ISO, First Pay Solutions LLC, headed by Chi “Vincent” Ko, allegedly facilitated payment services for merchants involved in scams ranging from a debt-relief program sold through deceptive telemarketing to peddling business opportunities thorough deceptive Web sites to using stolen credit card data to bill consumers without their consent, according to an FTC complaint filed Tuesday in U.S. District Court for the Southern District of New York. . . .
Treasury: 4 Million IRS Stimulus Payments To Be Sent Via Visa Prepaid Debit Card
PYMNTS – May 18, 2020
The U.S. Treasury Department and the IRS are planning to send out around 4 million Economic Impact Payments (EIP) via Visa prepaid debit cards rather than paper checks this week, according to a Treasury Department press release.
The EIP cards can be used for purchases, withdrawals from ATMs and transfers to bank accounts. They will come with protections against fraud and loss available to traditional bank account owners. . . .
Visa Applies For Digital Dollar Blockchain Patent
Forbes – May 14, 2020
The U.S. Patent and Trademark Office (USPTO) published today that Visa V has filed a patent application to create digital currency on a centralized computer using blockchain technology. This patent applies to digital dollars as well as other central bank digital currencies such as pounds, yen, and euros and so the physical currency of a central bank anywhere in the world could be digitized.
Described as ‘Digital Fiat Currency’ the patent was initially filed by Visa on November 8, 2019, with the USPTO commenting today, “It takes quite a while…” to publish the filing of a patent. Visa’s patent is described as a central entity computer that receives requests that include the serial number and denomination of a physical currency. The creation of the digital currency and the removal of the physical currency from circulation in a fiat currency system is recorded on a blockchain. . . .
AmEx: Beyond Transaction Platforms and Section 1
Competition Policy International – May 14, 2020
The Supreme Court’s 2018 decision in Ohio v. American Express (AmEx) sparked a number of debates over its meaning and scope. Those debates have been rekindled by recent decisions in FTC v. Surescripts and U.S. v. Sabre. The debates focus on (1) whether AmEx is limited to two-sided transaction platforms, (2) the proper way to measure competitive effects, and (3) whether AmEx is limited to claims under Section 1 of the Sherman Act. This Article provides legal and economic analysis of these issues. . . .
European Retailers Say Card Costs Rose After EU Capped Fees
PaymentsSource – May 14, 2020
Retailers including Tesco Plc, Ikea and Amazon.com Inc. called on European Union regulators to crack down on credit and debit card fees that have increased after laws capped so-called interchange fees five years ago.
EuroCommerce, an industry group that represents 6 million retailers, said card companies “have been steadily increasing the unregulated fees imposed on” stores. It wants the European Commission to widen the existing rules to cover other card transactions. It’s also asking for “strong and dissuasive penalties” if card firms don’t comply. . . .
Industry Developments
SPOTLIGHT: Facebook Takes on Amazon With Online Shopping Venture
Ars Technica – May 20, 2020
Facebook is hoping that its 2.6 billion users will begin shopping on its platform, as it unveiled a service that puts it in direct competition with Amazon and eBay.
“Facebook Shops” will allow sellers to create digital storefronts on Facebook or Instagram, the company said on Tuesday, adding that it would benefit by gathering valuable data on what shoppers want. Users will be able to browse products, message businesses to arrange purchases, and in some cases buy them directly via a recently introduced online checkout feature. . . .
Shopify Announces a New Merchant Debit Card and Support for Payment Installment Plans
TechCrunch – May 20, 2020
Shopify is announcing several new products and features today at Reunite, a virtual conference for the one million merchants using the company’s e-commerce platform.
The additions include Shopify Balance, which Chief Product Officer Craig Miller described as an attempt to rethink the bank account in a way that’s better suited to a business’ needs. . . .
Plaid Launches API Exchange To Accelerate Open Banking And Digital Transformation
Forbes – May 19, 2020
Data connectivity firm Plaid, which was acquired by Visa in January for $5.3 billion, announced the launch of the Plaid Exchange (PX). According to a press release:
“As fintech adoption has grown so have the needs of those institutions who must now manage unprecedented customer connections across thousands of fintech apps. Plaid Exchange gives institutions an open finance platform that includes everything they need to manage the data connectivity customers demand.” . . .
In a Twist on Contactless, Paypal Rolls Out a QR Code App for Small and Occasional Sellers
Digital Transactions – May 19, 2020
In an effort to reach occasional and very small sellers struggling with restrictions imposed to deal with the novel coronavirus pandemic, PayPal Holdings Inc. on Tuesday launched a Quick Response code capability for its mobile app. The feature allows a buyer to scan a QR code displayed by a seller to make a purchase in a face-to-face transaction, very much as users of the China-based services WeChat Pay, Alipay, and similar technologies can do.
The capability is rolling out in the United States and 27 other global markets, PayPal says, and will be free to start with. In the U.S. market, sellers can use the app free until July 31, after which they will pay 1.9% plus a dime per transaction, according to a PayPal spokesperson. . . .
US Ecommerce Sales Jump 14.5% in Q1, but Numbers Are Too Early to Show Full Coronavirus Impact
Digital Commerce 360 – May 19, 2020
Online spending represented 16.2% of total retail sales for the quarter, according to a Digital Commerce 360 analysis of U.S. Department of Commerce data. Figures, captured through March 31, don’t yet reflect the pandemic’s effect on the retail industry, and analysts anticipate Q2 will capture more of the shift in online shopping behavior as consumers remain homebound.
As the spread of the coronavirus in the United States picked up steam and signs of a growing global health and economic crisis surfaced, consumers spent $146.47 billion online with U.S. retailers in the first quarter, up 14.5% from $127.89 billion for the same period the prior year, according to retail data released Tuesday by the U.S. Department of Commerce. . . .
Mastercard Extends EMV Deadline, Launches Fraud Mitigation Plans
Mobile Payments Today – May 19, 2020
Mastercard is launching a consumer protection plan to reduce fraud at the gasoline pump as it postpones the EMV Automated Fuel Dispenser liability deadline for fuel merchants until April 2021.
Mastercard is joining other major card companies in providing a six-month extension on the deadline for upgrading to more secure EMV terminals, however the company is rolling out a new program designed to help mitigate the risk, according to a press release. . . .
Paypal Sees a Rise in ‘Silver Tech’ as Older Generations Test Digital Payments
CNBC – May 18, 2020
PayPal is attracting a new demographic during stay-at-home shutdowns: what it calls “silver tech.”
The company has seen an older audience flock to digital payments as cash is seen as a germ risk and people across the U.S. stay at home to avoid spreading Covid-19. People over 50 were the company’s fastest growing segment from March to April, according to PayPal. . . .
How Covid-19’s Economic Slowdown Is Disrupting Payments M&A
Digital Transactions – May 15, 2020
In the wake of 2019’s major merger-and-acquisition activity in the payments industry, the impact of Covid-19 is affecting the timing of deals, capital availability, and the due diligence process. That’s the assessment from panelists in the “M&A Trends in a Pandemic World” session at Transact Connect, the Electronic Transactions Association’s virtual conference underway this week.
What’s also different about M&A deals during the Covid-19 pandemic is that not as many are getting made as was the case earlier this year. In fact, very few deals are getting done now, said Greg Cohen, managing partner at PayXAdvisory, Los Angeles, and operating partner at Lovell Minnick Partners, a Radnor, Penn.-based investment firm. Some of those that are getting done are smaller or may involve recapitalization. . . .
Credit Card Companies Are Tracking Shoppers Like Never Before: Inside the Next Phase of Surveillance Capitalism
Fast Company – May 12, 2020
In the battle between data brokers and privacy advocates, the latest front is the credit card.
On Privacy.com, shrouding your online shopping habits sounds easy: Enter your debit or bank account information, and the website generates a virtual debit card. This so-called burner card acts as a buyer by proxy, keeping your name and billing address out of view. Simply type its number, expiration date, and CVV code into any e-commerce site, hit purchase, and Privacy takes over. The service charges your actual card, adds those funds to the burner one, and uses the new card to do the actual shopping.
The promise is appealing. The card can be configured so that retailers can’t tack on any additional charges, such as an automatic subscription fee. If the retailer’s site gets hacked, you just ditch the burner and move on. And if anyone involved in the transaction tries to sell your data, the only card information they’ll have is that the purchase came from Privacy. . . .
Google: The Next Big Fintech Vendor
Forbes – May 11, 2020
In an article titled Amazon’s Impending Invasion Of Banking, I wrote: “Amazon has no incentive to cut banks out of the lending or deposit business. Amazon can make more money by providing technology services to help financial institutions underwrite, process, and service loans. Banks will gladly pay for this, because Amazon will do it for a lower cost that what banks incur to do it today.” My argument then, as it is now, is that Amazon is poised to be a vendor—not a competitor—to financial institutions.
Four recent stories regarding Google signal that it, too, is following a similar path and is on its way to becoming the next big fintech vendor. . . .
– Curated by Kristian Soltes. For questions about the newsletter or its content, contact ksoltes@constantinecannon.com.