Payments News Update – January 14, 2021
Legal and Regulatory Developments
SPOTLIGHT: Visa Will Not Acquire Plaid After Running Into Regulatory Wall
TechCrunch – January 12, 2021
Visa and Plaid called off their agreement this afternoon, ending the consumer credit giant’s takeover of the data-focused fintech API startup. The deal, valued at $5.3 billion at the time of its announcement, first broke cover on January 13, 2020, or nearly one year ago to the day. However, the Department of Justice filed suit to block the deal in November of 2020, arguing that the combination would “eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers.”
At the time Visa argued that the government’s point of view was “flawed.” However, today the two companies confirmed the deal is officially off. In a release Visa wrote that it could have eventually executed the deal, but that “protracted and complex litigation” would take lots of time to sort out. . . .
The Office of the Comptroller of the Currency (OCC) granted digital asset platform Anchorage Trust Company a digital banking license, according to a press release Wednesday (Jan. 13). With the national trust bank charter, South Dakota-based Anchorage will become Anchorage Digital Bank, National Association.
The OCC conditionally approved the charter, meaning Anchorage had to agree to comply with certain capital and liquidity requirements, as well as the OCC’s risk management rules, the release stated. “The benefit of having a federally chartered bank is that it preempts all the state laws,” Anchorage President Diogo Mónica told CoinDesk. “The clarity of being regulated by the oldest regulator for banks in the United States . . . sends a very clear message.” . . .
Trump Administration Shelves Planned Investment Ban on Alibaba, Tencent, Baidu: Sources
Reuters – January 13, 2021
The Trump administration has scrapped plans to blacklist Chinese tech giants Alibaba, Tencent and Baidu, four people familiar with the matter said, providing a brief reprieve to Beijing’s top corporates amid a broader crackdown by Washington. Washington nonetheless plans to move forward this week with a bid to add as many as nine other Chinese companies to the list, one of the people said.
The decision to shelve plans to add the Chinese tech giants is a blow to China hawks in the administration, who have been seeking to cement outgoing President Donald Trump’s tough-on-China legacy before his presidency ends on Jan. 20. . . .
Wells Fargo to Pay $40m to Resolve Overbilling Suit
Law360 – January 12, 2021 (subscription required)
Wells Fargo Merchant Services LLC has agreed to pay up to $40 million in a settlement to end claims by small businesses that it overcharged them and hit them with early termination fees, according to a motion filed Tuesday.
The plaintiffs in the case, led by Patti’s Pitas LLC and Queen City Tours, told the court they reached an agreement with Wells Fargo as they asked for a preliminary approval of the deal, which also includes changes to the financial company’s practices that they say will save customers $50 million a year. . . .
Banks Keep Piling Credit Card Fees on Retailers: Congress Must Act
American Banker – January 11, 2021
Interchange fees that banks charge to process card transactions have long been a significant and growing burden, driving up costs for merchants and, ultimately, prices for consumers.
But the coronavirus pandemic has only exacerbated the problem and widened cracks in the broken payments industry as spending has moved online, where virtually all purchases are paid for by card. Online, merchants face even higher processing fees than what is charged for in-store transactions, and card industry obstacles make it difficult for merchants to exercise their legal right to route transactions to the lowest-cost networks. . . .
U.S. Federal Investigators Probe Business-Card Sales Practices at AmEx
Reuters – January 7, 2021
Federal investigators are probing business-card sales practices at American Express Co, the Wall Street Journal reported on Thursday, citing people familiar with the matter. The investigators are looking into whether AmEx allegedly “used aggressive and misleading sales tactics to sell cards to business owners and whether customers were harmed,” according to the report.
A spokesman for AmEx said the company had been cooperating with a regulatory review of small business card sales between 2015 and 2016 since spring, but declined to give further details including about the regulators involved. “We have conducted a detailed, independent review of these sales from this time period, and found no evidence of a pattern of misleading sales practices,” the spokesman said in an email. . . .
China’s Internet Regulator Weighs Tighter Curbs on Payment, Shopping Platforms
Reuters – January 7, 2021
China’s top internet watchdog canvassed public opinion on Friday for a plan to update rules more than two decades old, aiming to widen oversight of online services to cover payment, shopping and livestreaming platforms. For the first time, the Cyberspace Administration of China defined “internet information services” within its purview to include offerings by such platforms, as well as those of news information providers and search engines.
The move would “promote the healthy and orderly development of Internet information services,” it said on its official WeChat account. It would protect the rights and interests of citizens and organisations and safeguard national security and public interests, the regulator added. . . .
Big Tech Likely to See Pressure From Biden Administration
PYMNTS – January 7, 2021
Out of all of the chaos that has engulfed politics and, specifically, the nation’s capital these last few days, it bears sifting through the headlines and the tumult to see what’s to come.
A Biden administration will take root in two weeks with a majority in the House of Representatives and Senate. That makes it a lot easier to get a policy to make the leap from concept to reality, from proposal to law – at least theoretically. To be a bit more realistic, it should be noted that the Democrats now control the Senate with the slimmest of majorities, and that the current roster of senators might be deemed more moderate than has been seen in past “classes” of senators. That means would-be legislation is no slam-dunk. . . .
Top Court Mastercard Ruling Lowers Bar for UK Class Suits
Law360 – January 7, 2021 (subscription required)
Widely seen as a litmus test for the nascent competition class action regime in England and Wales, on Dec. 11, 2020, the U.K. Supreme Court issued its hotly anticipated judgment dismissing MasterCard Inc.’s appeal in the collective action brought by Walter Merricks.
In doing so, the Supreme Court has given clear guidance on the test to be applied at the certification stage for collective actions, and has markedly lowered the bar. This judgment will likely have a significant impact on collective actions in England and Wales — which are still in their relative infancy — for years to come. . . .
OCC Head Says Fintech Chartering Is His Agency’s Purview
Law360 – January 6, 2021 (subscription required)
The acting head of the Office of the Comptroller of the Currency on Wednesday welcomed a consumer financial law task force’s endorsement of federal charters for nonbank fintech companies, but suggested that his agency, not the Consumer Financial Protection Bureau, should be in charge of giving them out.
In a statement, Acting Comptroller Brian Brooks cautioned that granting chartering authority to the CFPB could blur the division of regulatory labor set up in the wake of the 2008 financial crisis, pushing back on a key recommendation from a CFPB task force report released earlier this week. “Under the law, the agency that grants national charters to companies engaged in lending, payments or deposit-taking is the [OCC], which has the responsibility for prudential supervision to ensure these chartered institutions operate in a safe, sound and fair manner,” Brooks said. . . .
PayPal Wins Its Lawsuit Against the CFPB, but the Legal Wrangling Is Far From Over
Digital Transactions News – January 5, 2021
PayPal Holdings Inc. may have prevailed in its lawsuit against the Consumer Financial Protection Bureau over the CFPB’s rules pertaining to prepaid cards and digital wallets, but the overarching legal battle is likely to continue. The ruling, which was handed down Dec. 30 by U.S. District Judge Richard Leon and vacates the CFPB’s rules pertaining to prepaid cards and digital wallets, will probably be appealed by the CFPB, says Ben Jackson, chief operating officer at the Innovative Payments Association, a Washington, D.C.-based trade group.
“The CFPB is likely to appeal because [Leon’s] decision will create a lot of challenges to the CFPB’s authority,” Jackson says. “The ruling says in essence that the CFPB can’t mandate when it comes to disclosure and that is a difficult precedent for the regulator.” PayPal filed the suit in the U.S. District Court for the District of Columbia in December 2019. . . .
SPOTLIGHT: Surcharges Re-Enter the Merchant Transaction Fee Debate
PYMNTS – January 13, 2021
As COVID has battered the economy and changed the way merchants do business, the time has come for them to analyze their clients and customers to see if recouping some or all of their transactional costs makes sense.
While so-called surcharging has been around for nearly a decade, and credit card processing fees have more than doubled during that time, the current climate has seen a growing number of businesses deciding to pass along some of the costs. But if and when merchants do make the change, Payroc Chief Financial Officer Kevin Hodges said, it must be done correctly. “We have a compliant surcharge program that, depending on certain geographies and certain card types, is able to track it in a way that complies with the state regulations and card regulations, and just makes it easier for the merchant to conduct business,” Hodges said in a recent interview with PYMNTS. . . .
AmEx, Citi Dangle Bevy of Perks to Antsy Premium Card Customers
Bloomberg Wealth – January 13, 2021
Commentary: PCI and EMVCo Have No Business Setting Standards
Digital Transactions News – January 13, 2021
Standards are the prerogative of the International Organization for Standardization (ISO) for most industries around the world. According to ISO, “ISO standards are internationally agreed by experts” and “should be thought of as a formula that describes the best way of doing something.”
Unfortunately, the roles of ISO and its U.S. agent, the American National Standards Institute (ANSI), have largely been supplanted by the PCI Security Standards Council (the organization behind the Payment Card Industry data-security standard) and EMVCo when it comes to setting payments standards in the U.S. The result is that most important stakeholder groups are essentially locked out of the democratic process espoused by ISO for ensuring stakeholder consensus on standards throughout the world. . . .
Walmart’s Fintech Startup Is Expected to Pack a Potent, Low-Cost Punch
Digital Transactions News – January 12, 2021
Unlike many fintech startups, Walmart’s Inc.’s new financial company is expected to be a formidable player right out of the gate. The retail giant unveiled plans late Monday to partner with Ribbit Capital to create a fintech that will provide what Walmart describes as “modern, innovative, and affordable financial solutions.”
Walmart, which will own the majority of the unnamed entity, will have a readymade customer base through the giant retailer’s millions of customers and employees, payment experts say. More than 265 million customers and members visit Walmart stores in 26 countries, in-store as well as via Web sites. The retailer also employs more than 2.2 million workers worldwide. . . .
NCR’s $1.7 Billion Cardtronics Bid Signals Appeal of ATM, Debit Network
PYMNTS – January 11, 2021
Cash. Digital. Even cryptos – and post-pandemic, a quickening embrace of the ATM. To that end, and as reported, NCR is looking to buy Cardtronics, in a deal that takes place amid recent news that Apollo Global and Hudson Executive Capital, private equity firms, were also gunning for Cardtronics.
The PE firms would reportedly pony up $35 a share, and the NCR proposal would offer $39 per Cardtronics share, which would be equivalent to about $1.7 billion. Let the games, as they say, begin – as a bidding war seems to be in the works, with an eye on self-service banking. As noted in this space over the weekend, there already exists a preliminary agreement between Cardtronics and the investment firms, but the higher price tag offered by NCR will likely spark a re-examination of a deal. . . .
Mastercard and Partners Will Test Common Android Phones and Tablets as Contactless POS Devices
Digital Transactions News – January 11, 2021
Mastercard Inc. will test contactless payment acceptance using common Android smart phones and tablets in the United States. The technology, relying on software developed by Mastercard Labs, enables these off-the-shelf devices to accept contactless payments with no special hardware.
Announced Monday, the service, called Tap on Phone, intends to capitalize on growing consumer and merchant use of contactless payments. In the 2020 third quarter, 41% of in-person purchases globally were made with contactless methods, up from 37% in the second quarter and from 30% a year prior. The card brand says Tap on Phone is the first use of its Cloud Point of Sale acceptance technology. . . .
Stimulus Check Visa Debit Cards Being Mailed to 8 Million Households
PYMNTS – January 8, 2021
Roughly 8 million stimulus check Visa debit cards are being mailed to households this week, the U.S. Treasury Department said in a press release on Thursday (Jan. 7). The Economic Impact Payment (EIP) cards were issued by MetaBank, N.A. as part of the second round of COVID-19 stimulus money. Stimulus funding under the CARES Act totaled more than $270 billion. Millions of payments have already been made via direct deposit and paper checks, with the goal of quickly delivering assistance.
The EIP cards will arrive by the USPS in a white envelope that “prominently displays the U.S. Department of the Treasury seal.” Instructions will also come with each card regarding how to activate and use it. . . .
QR Codes Set to Move From Sideshow to the Main Payments Stage
PYMNTS – January 7, 2021
While QR codes have become an extremely prominent part of the payments landscape in the Asia Pacific region in general and in China specifically, in the U.S. they’ve mostly been relegated to the periphery of the payment and commerce ecosystems. But they weren’t totally ignored in the country, with individual brands and merchants using them in specific one-off applications. But, as Citcon CEO Chuck Huang told PYMNTS CEO Karen Webster in a recent discussion, that may be about to change.
“The QR code is certainly part of the mobile payment effort, but I would say U.S. merchants were quite distracted over the last couple of years, because the industry gave them other solutions in terms of [contactless] mobile payments at the point of sale,” Huang said. “I think the open-loop wallets like PayPal or Venmo are gaining ground, but the merchant side of the solution has not completed the end-to-end payment experience that would enable those wallets to consistently transact at the point of sale in a store.” . . .