Payments News Update – June 4, 2020
Legal and Regulatory Developments
SPOTLIGHT: How PayPal’s Case Against the CFPB Could Spawn ‘Uncomfortable’ Results for Payments Players
Digital Transactions News – June 2, 2020
It was easy to lose track of it in the midst of all the impacts of the novel coronavirus, but a crucial federal lawsuit filed six months ago still hangs over the payments industry, carrying far-reaching implications for nearly all players. It’s PayPal Holdings Inc.’s action against the Consumer Financial Protection Agency over the CFPB’s final prepaid rule, and while it very much hasn’t gone away, some experts are worried its eventual resolution could hold very different implications from those they were expecting before PayPal brought its suit.
“We could be facing a different kind of environment by the time the case is rendered than we’re in today,” notes Ben Jackson, chief operating officer at the Innovative Payments Association, a Washington, D.C.-based trade group (Jackson also authors the monthly Payments 3.0 column for Digital Transactions). “That’s kind of what has us uncomfortable. We don’t feel people are talking enough about this case.” . . .
US Must Look to ‘Future Proof’ the Dollar With a CBDC
Finextra – June 4, 2020
Accenture and the Digital Dollar Foundation have published a whitepaper laying out proposals for the development of a central bank digital currency (CBDC) in the US. The partnership, known as the Digital Dollar Project, is seeking to “future-proof the dollar” against developments in the way consumers and businesses transact across the world.
Specifically, the Project wishes to protect the USD’s status as the world’s reserve currency, which may be under threat with other national governments exploring launching CBDCs. . . .
Federal Reserve Kicks Fedwire’s ISO 20022 Can Down the Road
Finextra – June 3, 2020
The Federal Reserve has announced it will not implement Phase 1 of the Fedwire Funds Services migration to ISO 20022 during 2020 or 2021. It confirms that it does not have any other message format changes planned through 2021. In September 2019, the Federal Reserve (the Fed) announced its plans to delay and reassess a phased implementation strategy in favour of a single-day implementation – known as a ‘big-bang’ approach also being taken in Europe.
The Fed notes the discussions around this change “have considered cross-border interoperability issues that may occur if the Federal Reserve Banks and other high-value payment system operators have not implemented the ISO 20022 messaging standard by the time SWIFT enables its participants to start sending data-rich ISO-20022 messages over its global network.” . . .
BofA Accused of Soaking Cardholders With Autopay Options
Law 360 – June 3, 2020 (subscription required)
Bank of America NA was hit with a proposed class action Wednesday alleging the financial giant tricks its credit card holders into choosing the highest interest option for their monthly payments, in violation of debt collection law.
In a New Jersey federal court complaint, BofA customer Michael Jette of Hoboken claimed the bank’s online autopay interface doesn’t make clear that the default option is actually the minimum amount due, which is the most costly method for the customer. “As a result, their credit card debt grows, and they accrue the interest they were trying to avoid — to Bank of America’s benefit,” the complaint said. . . .
Aussie Central Bank Considers Regulating ePayments Fees
PYMNTS – June 3, 2020
The Reserve Bank of Australia (RBA), the country’s central bank, is considering reducing the cost of electronic payments for merchants and consumers as COVID-19 makes e-banking preferable, Assistant Governor Michele Bullock said on Wednesday.
Reuters reports RBA is reviewing Aussie’s retail payments regulation to determine the cost and resilience of electronic payments and access to cash. Bullock has said ATM withdrawals were off 30 percent from March and more than 40 percent one year ago as customers switched to contactless payments. . . .
Japan Banks and Cashless Payment Firms to Explore Future ‘Digital Yen’
Japan Times – June 3, 2020
Three Japanese megabanks and cashless payment providers plan to set up a consortium this month in a bid to streamline and interoperate their services, a project that could evolve into the introduction of the “digital yen” envisaged by the Bank of Japan, sources close to the matter said Wednesday.
While a number of cashless payment services such as IC cards issued by railway operators and smartphone applications are widely available in Japan, participants are expected to study measures to boost their services to make them more convenient for customers. . . .
China’s Digital Currency Could Challenge Bitcoin and Even the Dollar
Bloomberg – June 1, 2020
People in China are no strangers to digital payments—if anything, it’s easier to move around and shop in Shanghai or Beijing with an Alipay or WeChat Pay smartphone app than it is bearing a pocketbook filled with yuan notes. Now the Chinese government has begun a pilot program for an official digital version of its currency—with the likelihood of a bigger test at the Beijing Winter Olympics in 2022. Some observers think the virtual yuan could bolster the government’s power over the country’s financial system and one day maybe even shift the global balance of economic influence.
Most money that gets swapped around electronically is just credits and debits in accounts at different banks. China’s digital cash is designed to be an electronic version of a banknote, or a coin: it just lives in a digital wallet on a smartphone, rather than a physical wallet. Its value would be backed by the state. But virtual cash would be quicker and easier to use than the paper kind—and would also offer China’s authorities a degree of control never possible with physical money. . . .
Google May Face Antitrust Case in India Over Payments App
Finance Rewind – May 30, 2020
The antitrust body of India is looking into some allegations that are Alphabet Inc’s Google is abusing market position to unfairly promote its mobile payments app within the country, Around 5 sources familiar with the case told Reuters. The complaint filed in February and the Competition Commission of India (i.e. CCI) has kept the identity of the complainant confidential, the 1st source with direct knowledge of the case told. Google didn’t respond to a request for comment.
Two sources said the watchdog informed Google about the case being filed a few days ago and also the company will respond in due course. A source told the case filing is currently being reviewed by senior CCI members. Literally, in such cases, Google will appear before watchdog that will then decide on the way forward. . . .
Industry Developments
SPOTLIGHT: The Rise of Card-On-File Commerce
PYMNTS – June 1, 2020
Gas stations are encouraging it. Many Main Street SMBs, local restaurants and designer boutiques are doing it for the first time. Fitness clubs have been doing it or a while — but some have gotten into trouble lately for doing it when they shouldn’t have. Uber and Starbucks pioneered it. Digital wallets and apps only work this way. So what is ‘it’?
Capturing and then enabling card-on-file payments when consumers buy the products or services they consume in the physical world. As the pandemic has forced the massive digital shift in how consumers and merchants interact in the physical world, and as shops and restaurants in all 50 states begin to reopen, consumers are now worried about the personal health risks related to that reopening, including touching anything that someone else has touched. Like payments terminals. . . .
Issuers Question the Corporate Card’s Long-Term Volume Reliability
PYMNTS – June 4, 2020
With commercial card adoption on the rise as more organizations make the shift to digital payments, card issuers continue to drive innovation with their corporate card products. But this week’s look at the latest in commercial card news finds growing questions about the reliability of corporates to drive revenues for card issuers with business travel on hold — possibly for the long term.
Despite being characterized by high transaction values, corporate card spend may no longer be a driver of growth for American Express, the firm’s chairman and CEO Steve Squeri recently said during a conference, according to The Company Dime. . . .
Google and Walmart Establish Dominance in India’s Mobile Payments Market as WhatsApp Pay Struggles to Launch
Tech Crunch – June 3, 2020
In India, it’s Google and Walmart-owned PhonePe that are racing neck-and-neck to be the top player in the mobile payments market, while Facebook remains mired in a regulatory maze for WhatsApp Pay’s rollout. Google Pay had more than 75 million transacting users last month, ahead of PhonePe’s 60 million users, people familiar with the companies’ figures told TechCrunch.
In comparison, SoftBank -backed Paytm’s app saw 30 million transacting users last month and an average of 10 million users transacted each day, people familiar with the matter said. Paytm has refuted these figures. TechCrunch could not determine daily transacting users of Google Pay and PhonePe. . . .
Why WSFS Bank Is Relying on QR Codes, Mobile Messaging to Enhance Customer Loyalty
PYMNTS – June 2, 2020
Digital banking technologies and payment tools are now mainstream in the financial industry. More than three-quarters of U.S. consumers used mobile banking applications to check their account balances in 2019, and 47.8 percent of millennial consumers have considered switching to digital-only banks.
The trend in consumers heading to online and mobile financial tools amid COVID-19-related stay-at-home orders follows a well-established pattern, but the pandemic appears to have boosted growth. Sixty-three percent of Americans report being more likely to try digital banking products right now, for example, and banks have seen rushes in online account sign-ups. . . .
Why Western Union, MoneyGram May Have to Merge to Survive the Coronavirus Crisis
PaymentsSource – June 2, 2020
The coronavirus pandemic has made paper money literally a dirty word, causing a rush to digital payments that may be too fast for Western Union and MoneyGram to keep up with as separate companies.
Western Union is reportedly trying to buy MoneyGram, which would combine the market’s two main legacy money transfer companies. Both company’s models have been under stress for years at the hands of fintechs that use blockchain and other emerging digital models to offer P2P rails for transfers, remittances and international payments. . . .
How Banks Can Work With Fintechs to Meet Evolving Digital Payments Needs
PaymentsJournal – June 2, 2020
With the backdrop of the global COVID-19 pandemic, the need for new and evolving digital payment services has become even more urgent. The global crisis has accelerated the timeline for businesses to eliminate the need for physical checks and manual processes by moving to a streamlined digital process.
Attempting to make this shift on a legacy platform comes with challenges that render quick implementation of digital real-time payments difficult or even impossible. Therefore, cloud-based APIs and open architecture are critically important for companies wanting to get payment platforms and services to market in a timely manner. . . .
The Future of Payments Beyond the Pandemic
PYMNTS – June 1, 2020
Physicist Niels Bohr — or maybe it was ballplayer Yogi Berra — once said predictions are hard, especially the ones about the future. Any sudden shock to the system like we have observed with the pandemic exposes both vulnerabilities and opportunities, especially for payments. But as to where we are headed — well, that’s a bit tougher to divine.
In a roundtable discussion, the last in the “Powering the Digital Shift” series with Karen Webster, six experts in money movement, fraud prevention, banking and financial technology discussed one sure bet: “Digital optional” is no option as we move toward contactless commerce. . . .
JCB, Techfund to Research Blockchain-Based Payments
Mobile Payments Today – June 1, 2020
Japan-based payments firm JCB Co. entered a strategic partnership with technology accelerator Techfund Inc. to do joint research on a sustainable payment system using blockchain technology. The payment system being researched is based on Techfund’s blockchain technologies, including a Security Token Offering and staking, which is a way to reward cryptocurrency holders that maintain funds in a system and contribute to the stability of the system.
An STO, similar to an initial coin offering or initial public offering, is a method of raising funds on the blockchain using tokenized securities. JCB is the largest card issuer and acquirer in Japan with more than 140 million cardmembers and a network of 34 million merchants. The card is issued in 24 different countries and territories worldwide. . . .
A Majority of Online Transactions Are Now Made With Mobile Devices, comScore Finds
Digital Transactions News – May 29, 2020
Mobile devices have captured more than 50% of online purchase transactions in many large countries, according to new research findings from comScore Inc. Mobile wallets, however, still account for only a minority of total mobile purchases.
Reston, Va.-based comScore, which researches Internet usage, says mobile’s share of online transactions rose to 51% in North America—the United States and Canada—in 2019’s fourth quarter compared with 46% in the second quarter. Those percentages were identical in Europe—the United Kingdom, France, Germany, Italy, and Spain—and higher elsewhere. . . .
The U.S. EMV Chip Card Count Surpasses 1 Billion
Digital Transactions News – May 28, 2020
Four years after the EMV chip card standard became the law of the U.S. payments land, the number of credit and debit cards with an EMV chip now exceeds 1 billion, and 63% of U.S. card-present transactions in 2019 involved an EMV card being read by an EMV-capable terminal, up from 53.5% in 2018.
Those numbers are some of the highlights in a report released Thursday by EMVCo, the standards body owned by the global card networks. The U.S. EMV credit and debit card count was 1.07 billion as of 2019’s fourth quarter, an increase of 232 million, or nearly 28%, from 842 million in late 2018. . . .
– Curated by Kristian Soltes. For questions about the newsletter or its content, contact ksoltes@constantinecannon.com.