Payments News Update – June 25, 2020
Legal and Regulatory Developments
SPOTLIGHT: Apple’s Easy Ride From U.S. Authorities May Be Over
Politico – June 24, 2020
The Justice Department and a coalition of state attorneys general are taking the first steps toward launching an antitrust probe of Apple, turning the iPhone-maker into the latest Silicon Valley giant to face legal jeopardy in Washington, three people involved in the discussions told POLITICO.
The individuals said DOJ and the AGs have spoken to several companies unhappy with Apple’s ironclad control of its App Store, the source of frequent griping by developers who say the company’s rules are applied inconsistently — particularly for apps that compete with Apple’s own products — and lead to higher prices and fewer choices for consumers. . . .
New York to Relax Cryptocurrency Rules
Finextra – June 25, 2020
Virtual currency firms wanting to conduct business in New York currently have to apply for a BitLicence, which can take years to process. Under the new regime, firms will be able to apply under a new ‘conditional licensing framework’ that makes it easier for start-ups to enter the New York market by piggy-backing on the licences already authorised by DFS.
Superintendent Linda Lacewell, says: “The DFS actions announced today in consultation with numerous industry participants and the public will boost responsible innovation and help get New York’s economy back on its feet. DFS is proud to foster accessibility and will continue to blaze a trail in the virtual currency marketplace.” . . .
Recent Bill Proposes the Federal Reserve Launch a Retail Bank
PaymentsJournal – June 24, 2020
Approximately 94% of the U.S. population has a tradition bank account and many additional consumers are served by a fintech solution and general purpose reloadable prepaid cards. The problems encountered by the IRS Fiscal Services to distribute the Economic Impact Payments (EIP) to individuals whose account details are not on file with the IRS has led legislators to consider using the U.S. Postal Service as a national bank.
An article in Roll Call provided background on the new bill, introduced in March, that proposes to have the Federal Reserve get into the business of offering free checking accounts with bill pay services, online banking, free ATM services and presumably build effective mobile apps and handle 24X7 customer service. . . .
Wirecard’s Former CEO Markus Braun Is Arrested
Wall Street Journal – June 23, 2020 (subscription required)
Wirecard AG’s recently departed chief executive, Markus Braun, was arrested by police, days after the German payments company revealed a $2 billion hole in its books. Munich city prosecutors said he was arrested late Monday on suspicion of presenting false information. It was a swift turn of events for Mr. Braun, who was Wirecard’s largest shareholder and served as CEO for nearly two decades until resigning last Friday.
The arrest is the latest rapid-fire blow for the company at the center of what appears to be Europe’s largest fraud in years. The company began to unravel last week when its auditors said that they couldn’t verify the money existed. Mr. Braun’s lawyers didn’t immediately respond to a request for comment. Mr. Braun, who turned himself in to police late Monday, is accused of “inflating Wirecard AG’s sales volume with fake income,” according to the prosecutor. . . .
Trump’s Latest Immigration Order Reaches the Payments Industry
PaymentsSource – June 23, 2020 (subscription required)
The Trump administration is accelerating its restrictions on immigration, including a ban on skilled workers that will make it harder for fintechs to hire people from outside the U.S. Trump’s executive order ties the restriction to the impact of the coronavirus, and includes H-1B visas and L-1 visas that often cover technology workers such as programmers and engineers.
“It has affected us. And not even H-1B. But L-1, which should be simpler to obtain,” said Chen Amit, co-founder and CEO of Tipalti, a San Mateo, Calif.-based firm that processes payments for companies that have disparate staffs, or use contractors, among other payment products such as FX. . . .
Brazil’s Central Bank Suspends WhatsApp Payments
Bloomberg – June 23, 2020
Brazil’s Central Bank has suspended Facebook Inc.’s WhatsApp messenger payment feature in the country, the app’s second-biggest market with more than 120 million users.
The decision aims to “preserve an adequate competitive environment, that ensures the functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap,” the monetary authority said in a statement on its website. Bank authorities requested that Mastercard Inc. and Visa Inc. stop payment and money transfer activities through the app. . . .
Economists at the Federal Reserve said an earlier version of Libra, the Facebook-linked stablecoin frequently targeted by lawmakers and central bankers as an economic wrecking ball, was unlikely to have lived up to its sovereign currency-killer hype.
Calling “fears of a so-called global stablecoin” “overstated” in a new report published Monday, economists Garth Baughman and Jean Flemming say policymakers may have focused perhaps too acutely on the likely downside of the previous Libra iteration’s multiple currencies backing a new stablecoin. The pair modeled a so-called basket-backed stablecoin in a hypothetical scenario, evaluating the likely impact that stablecoin would have on the economy as well as the likelihood of it being adopted. . . .
How Central Bank Digital Currencies Could Change the Future of Payments
Forbes – June 22, 2020
How we use money and make payments is changing in response to new technologies and expectations from consumers and businesses. People expect money to be safe and available to everyone. We want payments to be fast, efficient and flexible. Along with this, there has been a steady decline in the use of cash. An increasingly digital world has continued to change the way we think about money.
Every day, new digital currencies are being created, and the world grows more comfortable with the idea of digital assets. As this unfolds, some central banks have started to consider whether they might issue digital currencies of their own in the future. Across the globe, central banks are preparing to adapt to this changing nature of payments. . . .
Federal Reserve Announces FraudClassifier Model to Help Organizations Classify Fraud Involving Payments
Federal Reserve Press Release – June 18, 2020
The Federal Reserve today published the FraudClassifier model—a set of tools and materials to help provide a consistent way to classify and better understand the magnitude of fraudulent activity and how it occurs across the payments industry. The model was developed by the Fraud Definitions Work Group, which was comprised of Federal Reserve and payments industry fraud experts.
“The FraudClassifier model can help address the industrywide challenge of inconsistent classifications for fraud involving ACH, wire, or check payments,” said Jim Cunha, secure payments strategy leader and senior vice president at the Federal Reserve Bank of Boston. “The FraudClassifier model enables payments stakeholders to classify fraud in a simple and similar manner. It can be applied across an organization to help ensure greater internal consistency in fraud classification, more robust information and better fraud tracking.” . . .
SPOTLIGHT: With an $825-Million Deal for Finicity, Mastercard Picks up Open-Banking Tech for POS Credit
Digital Transactions News – June 23, 2020
Mastercard Inc.’s $825-million deal for Finicity Corp., announced Tuesday, may be aimed at ensuring a strong position in burgeoning markets like point-of-sale credit, but it could also prove handy as consumers struggle with the financial fallout of the coronavirus pandemic, observers say.
The acquisition, which Mastercard says should close by year’s end, will also help bring to the U.S. market an open-banking initiative the card network has been pursuing in Europe. Some observers see in it an answer, albeit at a much more modest price, to Visa Inc.’s January announcement that it would shell out $5.3 billion to acquire Plaid Inc., another provider of tools that allow fintechs to access users’ bank accounts. . . .
Shift4 Launches QR Pay as an Alternative to Contactless Payments via NFC
Digital Transactions News – June 24, 2020
Payments companies have been working for months against a backdrop of consumer fears induced by the new coronavirus, and on Wednesday Shift4 Payments Inc. launched a contactless-payment capability with a twist: it relies on Quick Response codes rather than the much more common near-field communication technology found in major-brand credit and debit cards and mobile phones.
The new service, called QR Pay, requires no app on the consumer’s phone and allows merchants to accept contactless payments via a channel in addition to NFC. Shift4, which went public earlier this month, has installed QR Pay at test sites and intends to offer the service at no charge to merchants generally, according to Nate Hirshberg, vice president of marketing for the Allentown, Pa.-based merchant-services provider. . . .
London Fintech Curve to Power Samsung Pay Card in the UK
TechCrunch – June 24, 2020
Curve, the London fintech that is re-bundling various financial products by letting you consolidate all your bank cards into a single card and app, is partnering with Samsung in the U.K. to power its forthcoming debit card, which is scheduled to launch later this year.
Dubbed “Samsung Pay Card” — and obviously a bid by Samsung to better compete with Apple Wallet and Apple’s own credit card launch — the product is being described as a digital payment solution that will give Samsung customers “greater flexibility and control when managing their finances by offering a single view of spend, whilst also enabling a simple and secure way to pay.” Just like Curve’s direct offering, it also promises the ability to “sync multiple loyalty and bank cards in one place” for a true digital wallet experience. . . .
Feeling Heat, Square Explains Its New Reserve Policy
Digital Transactions News – June 23, 2020
Facing criticism for withholding as much as 30% of some small merchants’ payment volume, merchant processor and business software provider Square Inc. on Tuesday posted an explanation of its new reserve policy. “Out of our millions of sellers, fewer than 0.3% have reserves on their accounts, but given increased interest, particularly in light of Covid-19, we wanted to take a step back to explain what reserves are, how we assess riskiness, and how we plan to further improve the seller experience,” the post says.
The post entitled “Why Square Uses Reserves” links to a mid-June story in The Wall Street Journal in which some merchants complained that Square was holding back up to 30% of their payment volume as reserves. The New York Times also published a similar story about Square Tuesday. . . .
Visa on How to Make Plastic Cards Sustainable
PYMNTS – June 19, 2020
Improving the world — and the environment — one (card present) transaction at a time. To that end, Visa said Tuesday (June 16) that it has joined with CPI Card Group to launch a card for Visa cardholders composed of up to 98 percent “upcycled” plastic. The Earthwise High Content Card seeks to help eliminate plastic waste. Drilling down into the compositional details, the upcycled, post-industrial plastic is known as rPETG.
In an interview with Karen Webster, Douglas Sabo, global head of corporate responsibility and sustainability for the payments giant, said the cards reduce first-use plastic, are EMV compliant and can handle contactless payments. . . .
Why U.S. Bank Ditched Plastic for Its Newest Corporate Credit Card
PaymentsSource – June 19, 2020 (subscription required)
Though mobile payments adoption hasn’t surged like contactless cards as consumers look for ways to minimize coronavirus spread, U.S. Bank is ditching plastic completely with its newest corporate card. From provisioning to paying online and in stores, the U.S. Instant Card is going fully mobile with an app leveraging users’ mobile wallets in what the Minneapolis-based bank said is an industry first.
“This is a virtual commercial card that can be pushed into a mobile wallet like Apple Pay or Google Pay, a new use case that improves on traditional virtual cards,” said Bradley Matthews, U.S. Bank’s senior vice president for the corporate payments group. The solution enables managers to extend temporary use of a commercial card to almost anyone—an employee, contractor or visitor—through a lightweight connection that requires only the recipient’s email and mobile number, according to Matthews. . . .
Splitit Adds Mastercard to Its Growing List of Payments Partners
Digital Transactions News – June 19, 2020
Splitit Payments Ltd. announced Thursday that it had signed a multiyear agreement with Mastercard Inc. intended to accelerate adoption of its installment-payment service for online merchants.
The distribution agreement opens the possibility of Mastercard-accepting merchants offering Splitit as a financing option to their customers. New York City-based Splitit also has struck partnerships with Visa Inc., online merchant processor Stripe Inc., and gateway and e-commerce services provider BlueSnap Inc. The new agreement further calls for Splitit and Mastercard to jointly develop new installment-credit products. . . .
Credit Cards and the True Cost of Interchange in B2B Payments
Spend Matters – June 18, 2020
I recently chatted with Roger McNamara, a 25+-year veteran of the payments industry, most recently as the Director of Business Development with American Express in the U.S. We started chatting about the impact of COVID-19 on B2C credit card business and why B2B transactions are increasingly becoming so important to card networks. If your card business has a heavy T&E component, you are taking a major hit due to the coronavirus.
Roger believes B2B is the next evolution for cards. But as we all know, it’s not like a B2C merchant where the transaction takes place face-to-face and you get your goods immediately or through e-commerce, where the goods arrive within a day or two. . . .
Coalition Including Ripple, GoPay Launches Universal PayId
PYMNTS – June 18, 2020
More than 40 different FinTechs, digital currency companies and nonprofits are teaming up to launch a universal payment ID in a bid to make transferring money akin to sending an email. Members of the newly-formed Open Payments Coalition, which include GoPay, Ripple, Blockchain.com, BitPay, Brave, Flutterwave, and Mercy Corps, say the newly minted PayID will enable customers to send and receive money across any of their payment networks without the hassle of dealing with credit card or bank routing numbers.
Overall, it is part of an even larger effort to spur the adoption of digital payments across the world and “break down the proprietary silos and standards that exist in payments,” the group said in a press release. “The international, cross-border payments industry has been ripe for disruption and we see PayID playing a pivotal role in achieving that,” Gaurav Dahake, CEO of BitBNS, said in the release. “We are excited to facilitate borderless, frictionless instant transactions for free for users.” . . .
Rewards Tailored for Quarantined Cardholders Are Keeping Travel-Related Cards Aloft
Digital Transactions News – June 18, 2020
Merchants that cobrand rewards cards to build business are often connected one way or another to the travel industry, but they may not have much to worry about even though the Covid-19 pandemic has kept consumers close to home. Twenty-three percent of these cardholders think they’re getting more value from their cards these days and another 58% say the value has stayed the same, according to survey results released Thursday by CreditCards.com LLC, a New York City-based marketplace for credit card offers. The survey took place last week and included more than 2,500 U.S. adults, of whom more than 800 pay annual card fees.
This is despite the fact that airlines, hotels, and other travel-related businesses shut down or severely curtailed operations starting in March. That made it difficult to cash in free miles or free hotel nights. . . .