Payments News Update – October 29, 2020
Legal and Regulatory Developments
SPOTLIGHT: The DOJ Is Investigating Visa’s $5.3 Billion Bid for Plaid on Antitrust Grounds
Tech Crunch – October 28, 2020
It’s not just big tech that’s getting the antitrust treatment from the Department of Justice. Late Monday afternoon, the Department of Justice tipped its hand that it was investigating Visa’s proposed $5.3 billion acquisition of the venture-backed Plaid, which allows applications to connect with a user’s bank account. It’s a tool that powers a good chunk of new fintech offerings, and the Justice Department has apparently spent the past year looking into how the deal would affect the broader market for new financial services coming from startups. The revelation that the DOJ was taking a closer look at the Plaid acquisition came from a petition filed in the U.S. Court for the District of Massachusetts to compel Bain, the consulting firm that worked on Visa’s bid for Plaid, to comply with the agency’s civil investigative demand (CID).
The DOJ is alleging that Bain has withheld documents demanded by asserting that it had some privilege over the documents — effectively stalling the DOJ’s investigation. “American consumers rely on the Antitrust Division to investigate mergers promptly and thoroughly,” said Assistant Attorney for the Antitrust Division Makan Delrahim, in a statement. “Collecting relevant third-party documents and data is essential to the division’s ability to analyze these transactions. Too often, third parties seek to flout these requirements, hoping the division will lose interest and focus its enforcement efforts elsewhere.” . . .
Australian Treasury Orders Review of Domestic Payments Regulation
Regulation Asia – October 27, 2020 (subscription required)
The Australian government has said it will review the regulatory architecture of the domestic payments system to ensure it remains fit for purpose and capable of supporting innovation beneficial for both businesses and consumers. “The regulatory architecture that applies to these new technologies, businesses and products have served us well, but have remained largely unchanged for over two decades,” the terms of reference of the review say.
“This review would look at the roles of industry self-regulation, regulators and the government and consider whether the balance is right in promoting competition, innovation, efficiency, resilience and stability of the system.” The announcement comes as part of the Digital Business Package laid out in the 2020-21 Budget. The government says it has plans to invest close to AUD 800 million (USD 570 million) to enable businesses to take advantage of digital technology and create jobs. . . .
Central Bank Digital Currencies Have the Power to Upend Global Finance
CoinTelegraph – October 26, 2020
Central bank digital currencies will fundamentally change our conceptions of money and its uses. An astonishing 80% of central banks are engaging in work around central bank digital currencies, from research to experimentation and pilot programs. A recent Bank for International Settlements, or BIS, chart demonstrates the growing interest in CBDCs by central banks, as reflected in speeches and reports as well as people’s Google search interests over time.
One country, in particular, to watch in this respect is China, which is emerging as one of the leaders in the shift to CBDCs. The People’s Bank of China introduced its CBDC in pilot form in the major city of Shenzhen and plans to use it in the area of the 2022 Winter Olympics in Beijing. China has been working on a digital currency since at least 2014, and press reports suggest it could be in operation by 2022. The implications of the introduction of a CBDC in the world’s most populous country and second-largest economy are likely to be important. . . .
India Bans Mobile Payment Providers From Launching New Proprietary QR Codes
NFCW – October 26, 2020
Payment system operators in India can no longer issue new proprietary QR codes for mobile payments, the Reserve Bank of India (RBI) has announced. The move is part of the RBI’s plan to implement a fully interoperable QR code infrastructure in 2022. India’s two existing interoperable QR codes, UPI QR and Bharat QR “shall continue as at present”, the RBI’s directive states, while payment system operators using proprietary QR codes “shall shift to one or more interoperable QR codes; the process of migration shall be completed by March 2022”.
“No new proprietary QR codes shall henceforth be launched by any PSO for any payment transaction,” the directive continues. The RBI says that it is now working “to standardise and improve interoperable QR codes” and that the measures it has announced “are expected to reinforce the acceptance infrastructure, provide better user convenience due to interoperability and enhance system efficiency”. . . .
Industry Developments
SPOTLIGHT: Discover Is the Latest to Activate the Common Buy Button as Consumers Go Online in Droves
Digital Transactions News – October 27, 2020
Discover Network on Tuesday became the latest of the Big 4 card networks to launch the Secure Remote Commerce technology the systems settled on last year to simplify and secure online transactions with a single buy button that works with all participating networks. The move comes as hordes of U.S. consumers have turned to e-commerce, many of them for the first time, in the face of the Covid-19 pandemic. Discover said the streamlined checkout is available at first to U.S. credit card holders, with work ongoing to support debit card transactions and also to bring the technology to markets outside the United States. Diners Club cards are not included “at the moment,” a Discover spokesman says. The company, which does not release cardholder statistics, adds it is working with merchants and acquirers to assist in integrating the technology.
Discover’s introduction of SRC comes not only at a time when e-commerce volumes have soared with consumers spending more time at home, but also following years in which consumers and merchants alike have complained about lengthy and friction-filled checkouts for card transactions. “With merchants seeing more and more purchases being made online and through mobile apps, and with the Covid-19 pandemic accelerating that trend, it’s critical we continue to provide a variety of solutions that make their payment experience quick, convenient, and more secure for their customers,” said Andrew Hopkins, Discover’s senior vice president of global products, in a statement. . . .
Discover Is the Latest to Activate the Common Buy Button as Consumers Go Online in Droves
Digital Transactions News – October 27, 2020 (subscription required)
Discover Network on Tuesday became the latest of the Big 4 card networks to launch the Secure Remote Commerce technology the systems settled on last year to simplify and secure online transactions with a single buy button that works with all participating networks. The move comes as hordes of U.S. consumers have turned to e-commerce, many of them for the first time, in the face of the Covid-19 pandemic. Discover said the streamlined checkout is available at first to U.S. credit card holders, with work ongoing to support debit card transactions and also to bring the technology to markets outside the United States. Diners Club cards are not included “at the moment,” a Discover spokesman says. The company, which does not release cardholder statistics, adds it is working with merchants and acquirers to assist in integrating the technology.
Discover’s introduction of SRC comes not only at a time when e-commerce volumes have soared with consumers spending more time at home, but also following years in which consumers and merchants alike have complained about lengthy and friction-filled checkouts for card transactions. “With merchants seeing more and more purchases being made online and through mobile apps, and with the Covid-19 pandemic accelerating that trend, it’s critical we continue to provide a variety of solutions that make their payment experience quick, convenient, and more secure for their customers,” said Andrew Hopkins, Discover’s senior vice president of global products, in a statement. . . .
Venmo, Square Cash, and PayPal Give the QR Code a Second Life
Forbes – October 27, 2020
My journey with QR codes in payments began in 2012 when I led the digital wallet efforts at Bank of America. We performed a trial with Paydiant and rolled the service out to a few merchants in Charlotte, NC. The trial was not very successful and the bank moved on to eventually work with Apple, Google, Samsung, and others on NFC-based mobile payment products. Many of the shortcomings of QR codes have not gone away, and for that reason, it’s interesting to see QR codes once again surface as a US payment mechanism of choice form Paypal, Venmo, Square and others. Let’s take a look at some of the shortcomings of the QR code, and why it seems to be getting a second chance in the US.
The humble QR code was originally created by Japanese manufacturers as a sophisticated barcode for tracking parts. The code quickly spread to other use cases due to its ability to carry more data and was introduced as a way to facilitate payments by Alipay in 2011. Alipay now has over 1.3B users and drives much of the commerce, along with QR-based competitor WeChat, in China and throughout Asia. . . .
JPMorgan Creates New Unit for Blockchain Projects, Says the Technology Is Close to Making Money
CNBC – October 27, 2020
JPMorgan Chase said its digital currency, JPM Coin, is being used commercially for the first time this week by a large technology client to send payments around the world. That development, along with other behind-the-scene moves, persuaded JPMorgan to create a new business to house its blockchain and digital currency efforts called Onyx, said Takis Georgakopoulos, the bank’s global head of wholesale payments. The unit has more than 100 dedicated staffers, he said. After years of hype with little to show for it, blockchain technology is on the cusp of a breakthrough: making money in actual business applications.
At JPMorgan Chase, the firm’s digital currency JPM Coin is being used commercially for the first time this week by a large technology client to send payments around the world, said Takis Georgakopoulos, the bank’s global head of wholesale payments. That development, along with other behind-the-scene moves, persuaded JPMorgan to create a new business to house its blockchain and digital currency efforts called Onyx, Georgakopoulos said last week in a phone interview. The unit has more than 100 dedicated staffers, he said. “We are launching Onyx because we believe we are shifting to a period of commercialization of those technologies, moving from research and development to something that can become a real business,” Georgakopoulos said. . . .
Real-Time Payments Are Changing Gig-Economy, Real Estate Payments at Small Banks
PaymentsSource – October 26, 2020 (subscription required)
Two smaller banks with strikingly different roots — a startup financial institution in Irvine, Calif., and a century-old Missouri-based bank — are seeing similar trends emerge around demand for real-time payments. Newer real estate and gig economy companies are most interested in real-time payments, while traditional corporations take a bit longer to explore use cases, according to two banks that were among the first to adopt RTP through FIS’ banking platform. Data about faster payments demand and usage at small and midsize banks is trickling in as FIS completes the first phase of RTP implementations via The Clearing House (TCH) network, three years after the nation’s largest banks (which collectively own TCH) launched the service.
Smaller financial institutions uninterested in RTP may wait up to three or four years for the Federal Reserve’s proposed FedNow instant-payments solution to launch, and neither Nano Banc nor First Bank wanted to wait that long. Jacksonville, Fla.-based FIS last year began exploring RTP rollouts with interested institutions, with implementations occurring over a couple of months during the pandemic, FIS said. Nano Banc and First Bank recently went live with RTP for receiving payments, with plans to add sending capabilities in the next few months, as they explore marketing and pricing for the new payments services. . . .
Amex Sweetens Premium Card Rewards, Again, With New Uber Perks
PaymentsSource – October 26, 2020
American Express boosted the perks on some of its premium cards once again as the card issuer tries to keep a lid on attrition during the coronavirus pandemic. Consumers with the firm’s platinum, gold and green cards will have free access to Uber Technologies Inc.’s Eats Pass — a subscription that typically costs $119 a year and offers discounts on the company’s food-delivery service. Gold-card customers also will receive $10 a month in Uber Cash, which can be used toward rides or food delivery, starting early next year. “Our card members crave food experiences and we’re seeing that they’re continuing to seek out food-delivery services to create those special experiences at home,” Rachel Stocks, Amex’s executive vice president for global premium products and benefits, said in a statement Monday.
Amex, long known for its premium travel and dining perks, has seen spending on its cards suffer during the pandemic as consumers have stayed home to stem the spread of Covid-19. That’s led the card company to quickly revamp some of its most popular cards to avoid losing customers. The effort seems to be working: Voluntary attrition rates on Amex’s proprietary cards remain lower than they were a year ago. Net card fees climbed 15% to $1.2 billion in the third quarter, the only category of noninterest income to increase. The changes ratchet up pressure on rivals JPMorgan Chase and Citigroup to consider changes to their own premium products. Consumers in recent years have flocked to such cards, often paying more than $500 a year to take advantage of their extra rewards and prestige. . . .
ExxonMobil Deploys QR Codes and NFC Tags for Streamlined Mobile Payment at the Pump
Digital Transactions News – October 23, 2020
Petroleum giant ExxonMobil Corp. is adding QR code and near-field communication-enabled tags to its fuel pumps for consumers using Apple Pay or Google Pay. ExxonMobil says more than 11,500 U.S. Exxon and Mobil stations will have the tags by year’s end. Users can hold their iPhones or Android phones against the tag or scan the QR code with the camera to activate the transaction. On iPhones, for consumers without the ExxonMobil app, the contactless connection prompts an Apple Inc. App Clips feature to display a portion of the full-fledged app without requiring the consumer download it at that moment. Instead, a small part of the app is activated—the payment part. Once the transaction is authorized, the app clip shows the status of the transaction and a prompt to get the full-fledged app.
Apple says App Clips, introduced in iOS14, is a small part of an app that lets a user do a task quickly, without downloading or installing the full app. Scanning the QR code or tapping the tag for consumers with the ExxonMobil Rewards+ app expedites the opening of the app, the company says. Typically, the consumer has to wake the phone and tap the app to open it. Customers with Android phones are prompted to download the app, where they can pay for fuel with Google Pay in the app. “Android customers who tap their phone to the sticker will be brought to a web-version of the Exxon Mobil Rewards+ app, where they can also pay for gas with Google Pay directly from the web page without having to download the Exxon Mobil Rewards+ app,” ExxonMobil says. . . .
Big Tech’s the Big Player in Real-Time Payments
PaymentsSource – October 23, 2020
The past few years have seen big tech becoming involved in a number of financial products that span deposits, loans and credit cards and that trend will come to the world of real-time payments. Google plans on launching a consumer bank account in collaboration with Citibank because they are interested in sitting on top of their financial infrastructure and expertise with their Google Pay technology. In 2019, Apple debuted a credit card created in partnership with Goldman Sachs. Like Google, the company has left much of the financial legwork to its bank partner, while designing the card and integrating it with its digital wallet app. We’ll see this infiltrate the real-time payments space: Big tech players will focus on maintaining the customer relationship, experience and capturing more customer activity, searching and buying behavior, but will remain a distributor, essentially leaving the business of payments products to financial institutions.
I can’t say this one enough: We’re going to see the data economy mature further, removing the emphasis on payments products or services. Data will become the core driver of value for payments systems. One is by predicting user behavior and by optimizing recommendations for payment services. These analytics can help payment providers plan and prioritize future product roadmaps. As the number of payment vehicles and schemes continue to grow, they add to the already cluttered set of choices a customer has to make. Most personal and corporate users lack the subject matter expertise to decide which payment scheme is best to use. . . .
Card Companies, Surprised by Low Write-Offs, Seek New Customers
Bloomberg – October 23, 2020
Lenders have spent months puzzled by the persistently low delinquencies on their credit cards. Now, they’re seizing the moment. Card companies Capital One Financial Corp. and American Express Co. said this week they’ve jump-started marketing efforts in recent weeks to bolster their brands and acquire new customers. And they plan to keep up the push through the holiday season. “This is the biggest disconnect that I certainly have experienced in my three decades of building Capital One between what we see in the economy itself and the actual performance of the consumer,” Capital One Chief Executive Officer Richard Fairbank said on a conference call Thursday. Still, he cautioned, “this is not a declaration that we see the light at the end of the tunnel.”
The fourth quarter is generally the busiest for card issuers’ marketing and customer-acquisition efforts, with many consumers applying for new credit lines or using up existing card rewards for their holiday shopping. But investors had been wondering what this year would look like, given the surge in unemployment caused by the Covid-19 crisis and resulting recession, and lenders’ stockpiling of reserves since the pandemic started. The last three months of 2020 will be particularly fraught for credit quality, with U.S. and worldwide Covid-19 cases spiking again and raising the prospect of additional pressure on consumers and the economy. Capital One expects “a significant sequential increase” in marketing costs in the last three months of the year after spending $283 million in the third quarter. At AmEx, executives said such costs should be similar to the $1.8 billion spent last quarter. That would be more than the $1.6 billion in marketing and business-development costs analysts were expecting. . . .
Facebook’s WhatsApp Enables In-Chat Purchases
PYMNTS – October 22, 2020
Facebook-owned WhatsApp is introducing new services that will enable business users to sell directly on the platform within chats, WhatsApp said in a statement on Thursday (Oct. 22). WhatsApp will also offer hosting services and other tools to make it easy for businesses to sell and users to shop. A Youtube video that WhatsApp released with its statement shows how the platform envisions the future of business messaging. “More than 175 million people every day message a WhatsApp business account. Our research shows people prefer to message a business to get help, and they’re more likely to make a purchase when they can do so,” WhatsApp said.
Hosting will be handled via Facebook, and WhatsApp said it plans to expand its relationship with partners so more business services can be offered. The company said it will also start charging businesses for some services, “which will help WhatsApp continue building a business of our own while we provide and expand free end-to-end encrypted text, video and voice calling for more than two billion people.” Founded in 2009, WhatsApp was purchased by Facebook five years later for $16 billion. The cross-platform mobile messaging app is used in 180 countries and lets individuals or groups exchange text, photos, videos, documents and location, as well as voice calls. . . .
– By Kristian Soltes. For questions about this newsletter or its content, contact ksoltes@constantinecannon.com.