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Payments News Update – June 12, 2020

Posted  June 12, 2020

Legal and Regulatory Developments

SPOTLIGHT: ‘Fraud’ Lawsuit Slams Plaid on Eve of Historic $5.3-Billion Payday
RIABiz – June 9, 2020

As Plaid nears the date when it banks a $5.3 billion dollar check from Visa, it may face a final hurdle from a class action alleging its value proposition depends on a “massive invasion” of the privacy of over 200 million bank and brokerage accounts.

Filed on May 5, the suit alleges that San Fransciso-based Plaid spoofs bank and investment firm logins to finagle a vast “trove” of “wrongfully obtained” data that it resells as “consumer behavioral insights.” Plaid is also alleged to have failed to disclose its process. The suit is a potentially major blow to the  company just six months after its sale to Visa effectively reset valuation expectations for wealth technology deals. . . .


Experts Tell Congress It’s Time To Create A ‘Digital Dollar’
PYMNTS – June 12, 2020

Trillions of dollars in federal COVID-19 stimulus payments are being disbursed through paper checks, prepaid debit cards and direct deposit — not very streamlined conduits when Uncle Sam needs to deliver aid speedily so that it’s most effective.

The concept of creating “digital dollars” for these payments has been floated on Capitol Hill in recent months, and the debate got more illumination Thursday (June 11) when a congressional task force heard testimony from experts on the subject. . . .


Trump’s New Top Banking Regulator Is a Bitcoin Bull
Forbes – June 11, 2020

Last week, as the world debated President Trump’s photo-op on the steps of St. John Episcopal Church, a mile away the Comptroller of the Currency’s office was quietly proposing potentially sweeping changes in banking regulations — with a specific emphasis on blockchain.

The new Comptroller, Brian Brooks, had just become the new top banking regulator for the Trump administration. His last job? General counsel to crypto powerhouse Coinbase. Brooks, as acting-Comptroller, makes it clear: blockchain is not the problem — he thinks blockchain is the solution to our problems. . . .


Australia Considers Consolidation of Payment Infrastructures
Regulation Asia – June 8, 2020 (subscription required)

An industry committee has been set up to explore the benefits of a consolidating the NPP, BPAY and eftpos – Australia’s three payments infrastructures. NPP Australia’s Board has formed an industry committee to explore the potential consolidation of BPAY, eftpos and NPP (New Payments Platform) into a single entity.

The move follows calls from the RBA (Reserve Bank of Australia) for the platform providers to consider whether alternate structural arrangements might be beneficial to the industry as a whole, pointing to the UK and Singapore as jurisdictions which have undergone similar consolidations of domestic payments infrastructure in recent years. . . .


In Defense of Class Actions: A Response to Makan Delrahim’s Commentary on the UK Mastercard Case
Competition Policy International – June 8, 2020

Few would argue with the proposition that, in the antitrust context, indirect purchaser class actions raise more difficult questions of commonality, impact, and manageability than direct purchaser class actions even though there may have been harm sustained at both levels. As a result, indirect purchaser class actions in the United States often are not certified for class treatment under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”) or comparable class action rules in state courts.

This does not mean, however, that indirect purchaser class actions can or should never be certified. Nor should they be summarily dismissed without first carefully analyzing the nature of the underlying violation, the number of levels in the distribution chain involved, the size and composition of the purported class, the particular features of the industry and products involved, and the economic models proffered by plaintiffs’ economic experts in support of class treatment. . . .


US Faster Payments Council Publishes Interoperability White Paper
Finextra – June 4, 2020

The U.S. Faster Payments Council (FPC), a membership organization devoted to advancing faster payments in the United States, today released a new Faster Payments Interoperability white paper developed by the FPC Network Committee. Interoperability in a faster payment system can help achieve seamless processing – both sending and receiving – of payment instructions across a variety of payment solutions.

Available in the FPC’s Faster Payments Knowledge Center, the white paper explores different models that can connect systems together to achieve payments interoperability such as point of origination, network to network, or with an intermediary, and how settlement could work in those models. Settlement is one of the defining characteristics of a payment system because settlement is how the transfer of value from one party to another occurs. . . .


Industry Developments

SPOTLIGHT: Merchants Bracing for Higher Reserve Requirements From Acquirers
Digital Transactions News – June 8, 2020

The economy is slowly thawing from its Covid-19 freeze-up, but many card-accepting merchants are struggling with more chargebacks stemming from canceled trips, non-delivery of goods, or other reasons. And some of them also are dealing with demands from their merchant acquirers for more cash to fund reserve accounts.

Payments and fintech attorney Darvin R. Davitian, counsel at the Washington, D.C., office of Perkins Coie LLP, estimates 15% to 20% of his merchant clients recently have received notices from their processors that they want to at least discuss the possibility of adding to their reserves. He didn’t have figures on how many actually have had increases. . . .


BitPay’s Prepaid Mastercard Launches in US to Make Crypto Accessible
Cointelegraph – June 11, 2020

Blockchain payments provider BitPay has launched a Mastercard prepaid card for crypto users in the United States. The BitPay Card enables customers to convert their cryptocurrency into fiat, which can then be loaded onto the card and spent anywhere Mastercard debit is accepted.

Card holders can also withdraw U.S. dollars from ATMs and make online purchases. BitPay CEO Stephen Pair told Cointelegraph that the BitPay Card is specifically targeted at crypto holders, serving as a tool to provide a convenient way to access spending power:.. . .


More Transaction Detail on Statements Could Prevent Many Chargebacks, Report Says
Digital Transactions News – June 10, 2020

With chargeback costs poised to grow an estimated 52% by 2023 for U.S. payment card issuers alone, issuers as well as merchants and merchant acquirers have every incentive to reduce those costs. And one way they could do it is by providing more transaction detail on consumers’ online credit card and bank statements, according to research firm Aite Group LLC.

In a report released Wednesday, Boston-based Aite says the annual chargeback cost to U.S. issuers was $585 million last year, an expense that will grow to an estimated $690 million this year and to $1.05 billion by 2023. Aite pegs the cost of resolving a single chargeback at $25. . . .


Point of Sale Credit Has Its Moment as a Crisis Hedge
PaymentsSource – June 8, 2020 (subscription required)

A mix of consumer debt and economic anxiety is shining a light on firms that offer alternatives to revolving credit. This, in turn, creates a chance to further tie financing directly to checkout. Companies like Splitit, Affirm and Klarna have different models, but all approach consumers with an alternative to revolving credit card debt for larger purchases at the point of sale.

Splitit reports 165% year over year growth in April, and a 153% jump from March to April in volume. Klarna reported a 16% weekly jump for the final full week of April for online warehouse volume, with similar weekly jumps dating to late March — just before most of the U.S. went under lockdown. . . .


First Turkish-German Trade Finance Transaction on Distributed Ledger Technology
Cointelegraph – June 7, 2020

A major Turkish bank completed the country’s first-ever international trade finance transaction based on distributed ledger technology, or DLT. This adds another milestone to the country’s increasing blockchain efforts.

İşbank, the first Turkish bank to join R3’s Corda platform earlier this year, now became the first bank in Turkey to use blockchain technology on trade finance transactions, Cointelegraph Turkey reported on Jun. 5. Using Corda blockchain technology, İşbank and Commerzbank secured payments by digitally processing the related data transfer. The transaction took place on 27 May 2020 between İşbank, Şişecam, Kuraray Europe GmbH, and Commerzbank AG and supported the trade of laminated glass interlayers from Germany to Turkey. . . .


Japan’s JCB Picks FIS for Cross-Border QR-Code Payments
Finextra – June 5, 2020

FIS(TM) (NYSE: FIS), a global leader in financial services technology, today announced that an international payment scheme, JCB, has selected FIS’ Payments One switching and acquiring services to enable cross-border QR-code payments.

As consumers seek greater speed and convenience in their payment transactions, merchants are increasingly adopting QR codes and other digital payment types. The Worldpay from FIS 2020 Global Payments Report found that digital wallets now account for 58 percent of regional eCommerce purchases and are expected to reach almost 70 percent by 2023. Digital wallets also now surpass cash at the point-of-sale, accounting for 36 percent of in-store sales in 2019. . . .


WeChat Rolls out Its Own Credit System Nationwide, Rivaling AliPay’s
Abacus News – June 5, 2020

Until this week, only one of China’s top two mobile payment apps offered its own user credit scores. That’s now changed as WeChat has officially rolled out its credit scoring system for all WeChat Pay users in China — as long as you have a Chinese ID number.

Called the WeChat Pay Score in English, the system comes nearly five years after Alipay launched Zhima Credit, aka Sesame Credit. That system from Tencent’s mobile payments rival Ant Financial was launched in 2015. . . .


Visa Says COVID-19 Crisis Could Help Drive $100 Billion Annual Shift to Debit Cards Over Time
MarketWatch – June 3, 2020

The COVID-19 crisis is pushing more purchasing over to debit cards in what could drive a $100 billion annual shift away from credit cards over time, according to Visa Inc. While U.S. credit-card volume on Visa V, +0.70% cards remained down from a year earlier in May, debit-card volumes were up 12% last month, the company disclosed in a Monday-afternoon filing.

“There’s a consumer psyche of sort of not spending someone else’s money but spending my own money,” said Oliver Jenkyn, Visa’s executive vice president for North America, at Baird’s Global Consumer, Tech & Services Conference on Wednesday. Visa estimates, based on past behaviors, that there could be a $100 billion annual shift to debit-card spending from credit-card spending over time, Jenkyn said. Consumers migrated spending to debit from credit in 2008, he noted, and even in late 2018 amid uncertainties around a government shutdown and trade tensions with China. . . .

 

– Curated by Kristian Soltes. For questions about the newsletter or its content, contact ksoltes@constantinecannon.com.

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