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Payments News Update – January 28, 2021

Posted  January 28, 2021

Legal and Regulatory Developments

SPOTLIGHT: UK Merchants to Face Post-Brexit Fee Increase From Mastercard
Business Insider – January 26, 2021

In response to Brexit, Mastercard is reportedly planning to increase fees for UK online card purchases. And this move could negatively affect cash-strapped merchants. Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry with the Payments & Commerce Briefing. You can learn more about subscribing here. The card network is reportedly planning to hike debit and credit card fees for online transactions between the UK and EU starting in October, per the Financial Times.

Mastercard’s UK card fee hike is set to benefit issuing partners. Credit card fees are set to rise from 0.3% to 1.5%, while debit card fees are set to increase from 0.2% to 1.15%. In 2015, the EU introduced a card fee cap, which limited the amount of fees that card companies could charge EU merchants. However, Mastercard says that now that the UK has officially left the European Economic Area, the fee cap no longer applies and transactions between the UK and EU are now considered “inter-regional.” . . .


Biden’s OCC Expected to Chart New Course for Fintechs, Crypto, AML
PaymentsSource – January 27, 2021 (subscription required)

The Biden administration is closing in on its nomination for chair of the Office of the Comptroller of the Currency, a job with a dramatically higher profile given the maturation of challenger banks, cryptocurrency and security risks.

The short list includes Michael Barr and Mehrsa Baradaran, with Barr considered the favorite while Baradaran is preferred by the Democratic Party’s liberal wing. Barr is dean of the University of Michigan’s public policy school, and served in the Treasury Department under Clinton and Obama. Baradaran teaches at the University of California at Irvine Law School and is an expert on the racial gap in financial services. Biden’s earlier financial services regulatory picks include Rohit Chopra to head the Consumer Financial Protection Bureau and Gary Gensler to head the Securities and Exchange Commission. The Senate has confirmed Janet Yellen as Treasury Secretary. . . .


China Central Bank Policymaker Says Fintech Needs Regulation Just Like Banks
CNBC – January 27, 2021

The central Chinese government is making it clear that fintech companies like Ant fall under the same stringent financial regulation as banks. Many start-ups in China and other countries are using new technology to sell cheaper and faster financial services, from money transfers to loans.

“But fintech is still finance in essence, so the principle of ‘same business, same rules’ should apply,” Pan Gongsheng, deputy governor of the People’s Bank of China, wrote in an opinion piece in the Financial Times Wednesday. Pan also heads the national foreign exchange regulator, the State Administration of Foreign Exchange. “We need regulation that emphasises the substance not the form of a company,” Pan added. “The aim is to align business rules and standards with regulation to fend off arbitrage.” . . .


President Biden’s Financial Team Will Clarify Bitcoin and Cryptocurrency Regulations
The Motley Fool – January 26, 2021

The incoming heads of the SEC, the CFTC, and the Treasury have a deep understanding of cryptocurrency and fintech issues.

The cryptocurrency market is looking for a firm regulatory framework. Governments around the world are trying to figure out whether bitcoin is a currency, a tradable commodity, a security on par with stocks and options, or a brand new asset class of its own. Once they figure that one out, they’ll have to ask the same questions about Ethereum, Tether, Ripple, and Cardano, and the list of major cryptocurrencies only grows longer over time. Settling the thorny issues of legality, taxation, and trading rules will take time, adding to the uncertainty and volatility of the global crypto market. President Biden is putting together a team of financial leaders that should clarify the tricky cryptocurrency market in a hurry. Three of Biden’s top-level financial staff picks have a proven understanding of how blockchain and cryptocurrency assets actually work. . . .


State of Crypto: Unpacking the Trump Presidency’s Crypto Legacy
Coindesk – January 26, 2021

A number of crypto issues are on deck as Joe Biden enters the second week of his presidency. This week’s edition of SoC looks at what now-former President Donald Trump left behind. Crypto grew rapidly over the four years Trump was in office – despite his own public admission that he is “not a fan” of bitcoin. While he wasn’t directly responsible for this growth, the regulators he appointed and some of the policies his administration pursued undeniably boosted the crypto industry. After four years, here’s what his administration left behind.

The Trump administration was largely friendly toward the industry (with a few notable exceptions), and ushered in a wave of regulations and products that were welcomed by the crypto community. The Trump administration stopped short of actually setting a policy direction, however. Almost all of the crypto-friendly actions were conducted by the regulators he nominated to various posts, and no significant legislation on the crypto space was passed or signed into law. . . .


A Planned Pilot for FedNow Spurs More Than 110 Banks and Processors to Sign Up
Digital Transactions News – January 25, 2021

The Federal Reserve reported late Monday it has received more than 110 expressions of interest from financial institutions and processors for a real-time payments pilot program slated to start later this quarter. That number exceeds the 80 entities the Fed expected to participate in the pilot for the FedNow service, which the central bank has been working on since announcing the program in August 2019.

Among the institutions on the pilot list are major banks like Capital One Financial Corp., Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wells Fargo Co. But scores of small community institutions are also listed, along with large and small processors with roots in the banking industry, including Fiserv Inc., FIS Inc., and Jack Henry & Associates. Among fintechs listed are Green Dot Bank and ACI Worldwide Inc. . . .


Industry Developments

SPOTLIGHT: As Open Banking Grows More Popular, Banks Work to Streamline Links to Fintech Apps
Digital Transactions News – January 27, 2021

The firms that make payments apps work behind the scenes are facing a growing problem. As more and more consumers use the apps, more and more banks get involved, casting an ever-widening net of unique requirements on the data networks that connect the apps to users’ bank accounts. That places constraints on an increasingly popular trend known as open banking. “If this is a problem with a handful of banks, how is anyone going to handle hundreds or thousands of banks?” asks Ben Isaacson, a senior vice president at The Clearing House Payments Co. LLC, which this week launched a service to simplify the process. TCH, owned by 24 of the nation’s biggest banks, has piloted the solution, which it calls the “Streamlined Data Sharing Risk Assessment,” with seven major banks and two data aggregators, Plaid Inc. and Finicity Corp., which is now part of Mastercard Inc.

The key to the new approach is a common questionnaire that all participating banks agree to accept from each data network or financial-app developer. That approach replaces the current process, in which each bank requires that its own unique form be completed. As financial apps proliferate and grow in popularity, that method is creating a problem for aggregators and developers alike.. . .


Is There a Link Between Cashless Payments and Unhealthy Consumption?
Phys.org – January 27, 2021


PayPal Expands Its QR Payment App to Small Businesses via Vistaprint
Digital Transactions News – January 27, 2021

Vistaprint, a provider of physical and digital marketing materials to small businesses, announced Wednesday an agreement with PayPal Holdings Inc. to enable small businesses to accept payments through Quick Response codes.

To order Vistaprint marketing materials with a QR code, small businesses log on to Vistaprint’s Web site and choose a product on which they want the QR code printed, such as tabletop signage, stickers, decals, and banners. Next, the business owner selects a product template or creates a customized design featuring their logo. A QR code is then auto-generated and printed on the marketing materials. Once printed, businesses can display the materials, which consumers can scan with a smart phone to activate PayPal’s contactless-payment app.  . . .


Open Banking Meets Instant Payments at the Online Checkout
PYMNTS – January 26, 2021

Last week marked the third anniversary of PSD2, the regulation that launched open banking in the U.K. and Europe. And those three years have given rise to a slew of new companies capitalizing on that initiative all over the world, as well as established companies making their mark. According to Ossama Soliman, chief product officer at open banking provider TrueLayer, the very fact that there are so many payment options pushes new entrants to differentiate themselves from the pack.

“It is definitely getting very cluttered. I’ve spent the last 15 years of my career in payments, and it’s something that has been an increasing problem throughout,” Soliman said in an interview with PYMNTS. “But actually, it raises the bar for what it takes to add a new payment method into the checkout.” . . .


NCR Signs Deal to Acquire Cardtronics for $2.5 Billion
ZDNet – January 25, 2021

NCR plans to use the deal to accelerate its as-a-service strategy and non-hardware revenue. NCR said Monday that it’s buying Cardtronics in a deal valued at $2.5 billion. NCR, a predominate maker of ATMs and point-of-sale terminals, plans to use the deal to accelerate its as-a-service strategy and non-hardware revenue.

Cardtronics is a non-bank ATM operator and provider of managed services and payment processing for retailers and financial institutions. NCR said Cardrtonic’s Allpoint retail-based, surcharge-free ATM network is highly complementary to NCR’s payments platform. The company also sees an opportunity to push further into the payments space via Cardtronics’ existing network and installed base. . . .


How COVID Turbocharged the QR Revolution
BBC News – January 22, 2021

“Our customers love it,” says Michael Schatzberg, the co-founder of a US restaurant group. He is talking about using QR codes (quick response codes), a technology from the 1990s, which is proving to be very useful in the Covid era. Many restaurants have turned to the tech, which allows customers to see a menu, order and pay just by pointing their smartphone at the black, barcode-like squares. “They don’t have to wait. They can just pay and leave without asking for the bill,” says Mr Schatzberg, whose restaurants include Duke’s and Big Daddy’s in New York.

QR codes were invented in Japan in the mid-90s to track components in car production. They can hold a massive amount of data compared to standard barcodes – up to 2,500 numeric characters compared to a barcode’s 43. That means really useful information, including names, locations and website addresses can all be reliably and cheaply held in one small box. . . .


As Consumers and Businesses Turn to Electronic Channels, ACH Growth Accelerates
Digital Transactions News – January 21, 2021

For the nation’s automated clearing house network, payments trends already under way before the coronavirus pandemic are still unfolding—only faster.

ACH payments initiated on the Web to pay bills and make other transfers totaled 2.1 billion in 2020’s fourth quarter, a 15.2% increase year-over-year, Nacha reported Thursday. Herndon, Va.-based Nacha is the governing body for the network, which links virtually every financial institution in the country. The result for Internet transactions comes as consumers and businesses scramble to avoid in-person payments in the face of  Covid-19. Likewise, peer-to-peer ACH payments ballooned nearly 44%, totaling 61.8 million for the quarter. Meanwhile, businesses and governments have increasingly turned to electronic channels for payroll and other disbursements to individuals. Nacha reports these direct-deposit payments came to 2.1 billion in the quarter, up 11.1%. . . .

 

 

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

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