Payments News Update – April 22, 2021

Legal and Regulatory Developments

SPOTLIGHT: At Congressional Hearing, Panelists Question Why Crypto and Fintech Firms Need Bank Licenses
The Block – April 15, 2021

Congress collected feedback from legal minds on how fintech firms may use or abuse banking licenses. The hearing, entitled “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters,” included former Comptroller of the Currency Brian Brooks
Many panelists condemned the OCC for “overreaching” in its dealings with fintech. Congress gathered a group of legal experts Thursday for a hearing on fintech’s use of bank licenses. Ultimately, much of the dialogue centered on one particular subject: if a crypto firm wants to offer certain banking services, is the OCC in charge of giving the green light?

The hearing featured three law professors, a representative of the National Association of Federally-Insured Credit Unions (NAFCU) and former U.S. Comptroller of the Currency Brian Brooks at a hearing entitled “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters.” Most of the gathered panelists criticized Brooks’ work to issue bank charters to fintech companies during his time as head of the Office of the Comptroller of the Currency (OCC). Though policy-watchers in crypto circles praised the OCC’s work at the time, Erik Gelding, a professor at University of Colorado’s law school, directly urged Congress to take action to keep the OCC from issuing any new charters to entities that don’t plan to accept deposits.

In the view of some panelists, entities that only engage with some activities regulated by a bank license, but not all or most of the activities that fall under that purview, shouldn’t be regulated as national banks. As Kristin Johnson, a professor of law at Emory University, put it: “A non-deposit national bank is an oxymoron.” . . .

China’s Supreme Court Eyes Tougher Antitrust Proceedings
Global Times – April 22, 2021

China’s supreme court on Thursday unveiled plans to toughen proceedings of the country’s competition legislation over the course of the 14th Five-Year Plan period (2021-25), crystallizing a more effective regulatory framework for the platform-based economy. Relevant judicial interpretations would be formulated at an opportune time to unequivocally rein in varied monopolistic and anti-competitive behavior, eliminate market blockages and boost fair competition, according to an intellectual property judicial protection plan for the five-year period published by the Supreme People’s Court (SPC).

The supreme court pledges to properly handle monopolistic disputes in the internet sphere, improve antitrust judging rules for the platform economy, prevent the unchecked expansion of capital, and push for the regulated, healthy and sustainable development of online platforms. Also on Thursday, the country’s market regulatory authorities held an antitrust work conference in Kunming, Southwest China’s Yunnan Province. Describing 2020 as an iconic year for the country’s antitrust push, the State Administration for Market Regulation (SAMR) revealed in a statement after the meeting that it closed 109 monopoly cases throughout the past year with penalties totaling 450 million yuan ($69.33 million). . . .

China Says Digital Yuan Will Focus on Domestic Usage
PYMNTS – April 18, 2021

China is expanding the trial of its digital yuan, but the currency should not be seen as a weapon against the U.S. dollar, central bank Vice Governor Li Bo told conference attendees Sunday (April 18), Reuters reported. Last year, China launched a trial of its new central bank digital currency (CBDC) in cities including Suzhou, Shenzhen, Chengdu and Xiong’an, Reuters reported. Li told the Boao Forum for Asia that testing is showing the digital yuan, also called the e-CNY, is working well within China’s banking system. Officials are developing a regulatory framework for the digital yuan, and there is no timetable for the expansion of its use, but that expansion will occur, Li said, per Reuters. Visitors to next year’s winter Olympics in China will be able to use the currency. Over time, the digital yuan will be set up for cross-border payments.

According to Reuters, the U.S.-educated Li said the currency will naturally expand, but Chinese authorities have no plan to see it replace the U.S. dollar, which is the primary medium for international transactions. Bloomberg quoted Li as having said: “For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies. I think our goal is to allow the market to choose, to facilitate international trade and investment.” Bloomberg reported the administration of President Joe Biden is concerned the digital yuan, in the long run, could replace the dollar for international exchange. . . .

U.S. House Committee Approves Blueprint for Big Tech Crackdown
Reuters – April 15, 2021

The U.S. House of Representatives Judiciary Committee formally approved a report accusing Big Tech companies of buying or crushing smaller firms, Representative David Cicilline’s office said in a statement on Thursday. With the approval during a marathon, partisan hearing, the more than 400-page staff report will become an official committee report, and the blueprint for legislation to rein in the market power of the likes of Alphabet Inc’s (GOOGL.O) Google, Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O) and Facebook Inc (FB.O).

The report was approved by a 24-17 vote that split along party lines. The companies have denied any wrongdoing. The report first released in October – the first such congressional review of the tech industry – suggested extensive changes to antitrust law and described dozens of instances where it said the companies had misused their power. “Amazon, Apple, Google, and Facebook each hold monopoly power over significant sectors of our economy. This monopoly moment must end,” Cicilline said in a statement. “I look forward to crafting legislation that addresses the significant concerns we have raised.” . . .

Industry Developments

SPOTLIGHT: With the Deadline Having Passed, Less Than Half of Sellers Comply With Gas Pump EMV
Digital Transactions News – April 19, 2021

Saturday has come and gone, and it appears plenty of gas stations—including many branded by major oil companies—are still falling short of chip card acceptance at the pump, despite a deadline for EMV compliance that fell on April 17. Some 48% of fuel and convenience-store sellers have complied with the automated fuel dispenser compliance mandate set by the card networks, according to a survey by payments provider ACI Worldwide Inc. of sellers representing 45,000 gas stations across the country.

Liability for fraud on sales at pumps that are not EMV-capable will now shift from the card issuer to the seller. “Although previously protected from fraud losses, merchants will now bear the brunt of fraud overnight,” said Debbie Guerra, an executive vice president at Naples, Fla.-based ACI, in a statement. Visa’s April 17 deadline followed by one day mandates set by the other major card networks, all of which had already extended the deadline several times in recent years. Merchants complain the hold-up lately has been caused by a shortage of technicians capable of carrying out the conversion at the pump. . . .

‘Open Banking’ Is What ‘Banking’ Has Rapidly Become
PaymentsSource – April 21, 2021 (subscription required)

The words “open” and “banking” have developed a specific association in recent years. And it’s perhaps too early to drop the open in open banking as something inherent. But, in the same way that digital is largely unnecessary in digital banking now, it won’t be long. Still, outside—or often as a result—of open banking, the banking sector is opening up. Below are some of the ways we’re seeing it evolve.

Whether deliberately or coincidentally pushing government agendas, the financial incentives to banks and financial technology companies (fintechs) around financial inclusion are bigger than ever. The global gig economy is projected to be worth $455 billion by 2023, according to a study from Mastercard and Kaiser Associates. Unbanked and underbanked populations around the world represent an important proposition. That’s particularly so in an increasingly congested market. For example, the provision of credit through alternative scoring methods or early real-time access to a portion of a paycheck are as relevant for nearly cashless Sweden as for cash-reducing Egypt in their open-banking agendas. And the support of electronic IDs as open banking broadens into open finance is as important for Australia’s myGovID as it is for India’s Aadhaar biometric ID system. . . .

Online Returns Come to BNPL as Affirm Makes a $300 Million Bid for Specialist Returnly
Digital Transactions News – April 21, 2021