Payments News Update -- June 26, 2019
Legal and Regulatory Developments
SPOTLIGHT: Tariff Pressure Takes Aim at Payment Equipment Once Again
Digital Transactions News – June 20, 2019
While legislators and regulators focused much of their attention on the Facebook-backed Libra cryptocurrency this week, tariffs on Chinese-made goods re-emerged in Washington as a threat that could raise prices for merchants and merchant acquirers.
The Electronic Transactions Association payments trade group filed comments with the Office of the United States Trade Representative opposing the Trump Administration’s proposed 25% tariffs on Chinese-made cash registers, point-of-sale devices, and related equipment. ETA interim chief executive Amy Zirkle testified Wednesday before an inter-agency federal committee taking comments on the plan. . . .
Regulators Want to Know What Facebook’s Libra Will Mean for the US Financial System
CNN – June 25, 2019
Lawmakers wasted little time making plans to examine Facebook’s cryptocurrency. The US House Financial Services Committee has scheduled a hearing on Facebook’s Libra for July 17, one day after a planned Senate banking committee hearing on the digital currency.
Politicians in both the United States and abroad began sounding the alarm just days after Facebook (FB) announced its cryptocurrency plans last week. The company says Libra, which will be managed by an independent nonprofit organization, has the potential to become a universally accepted digital currency that could fundamentally change payment systems and improve financial inclusion. But US regulators want to know what that will mean for the American financial system, as well as consumers and investors. . . .
Singapore’s Regulators Could Give Rise to New Class of Bank Rivals
PaymentsSource – June 24, 2019 (subscription required)
Banks are rightly focused on PSD2 as an international gateway for fintechs to disrupt banking, though potential deregulation in Singapore can give digital payment companies another route to take share directly away from banks.
The Monetary Authority of Singapore is considering granting banking licenses to fintechs that provide digital payments and other financial services, greatly increasing the number of banking companies. The MAS currently provides banking licenses to digital-only subsidiaries of licensed banks. The potential expansion would allow companies with nonbank parents to offer banking services without a branch footprint. . . .
Fed Essential to Ensuring Equal Access in Real-Time Payments
PaymentsSource PayThink – June 21, 2019
In a recently released set of principles on its Real-Time Payments settlement service, The Clearing House pledged to operate the system as a public utility with one major caveat — it must not have any competitors. While TCH opposes the entry of the Federal Reserve as a competitor in this sector of the payment system, a Fed-operated real-time settlement system would ensure access and choice for all financial institutions and customers and create a foundation for a new generation of payments innovation.
The Fed’s development and operation of a real-time gross settlement system, or RTGS, would insert needed competition into real-time payments and avoid the risk of having only one, private-sector settlement service. The Fed is a trusted partner among community banks and has provided operational continuity, especially in times of national crisis. . . .
PSD2 Has a Compliance Surprise for Unaware U.S. Merchants
PaymentsSource PayThink – June 20, 2019
Although PSD2 is only being enforced in the European Economic Area (EEA), European companies are not the only ones who should be paying close attention to these new regulations.
This September, the Payment Services Directive 2 (PSD2) requirement to perform Strong Customer Authentication (SCA) will officially go into effect. . . .
Facebook Discussed the Launch of Its Cryptocurrency With the Fed, Jerome Powell Says
CNBC – June 19, 2019
Federal Reserve Chairman Jerome Powell said on Wednesday that Facebookspoke to the central bank about the digital currency called Libra that the tech giant is helping create.
“Facebook, I believe, has made quite broad rounds around the world with regulators, supervisors and lots of people to discuss their plans and that certainly includes us,” Powell said. . . .
Canada’s Transit Fare Plan Could Loosen Debit Card Rules Nationwide
PaymentsSource – June 18, 2019 (subscription required)
Payments Canada is proposing to allow delayed transaction authorization to enable debit cards to be used in open-loop transit — and the change could affect far more than commuters.
Currently, Canadian debit cards must be authorized in real time. The rule change would apply to other low-value purchases where online real-time authorization for debit may not be available, such as vending kiosks, on-board airline or train purchases, and parking meters. . . .
Industry Developments
SPOTLIGHT: Payments Execs Weigh in on Innovation for the Roaring 2020s
PYMNTS – June 26, 2019 (download the report here)
A decade is a nice, round number — a convenient marker for what has come and what is coming. We as humans tend to measure our lives in decades, referring to ourselves as children of the ’60s, perhaps, or pining wistfully for the synthesized pop sounds of the ’80s.
In payments, 10 years is a long time — where everything can change, and where once fanciful notions can become ubiquitous new ways of transacting. That said, we are now at the six-month mark of 2019, and a new decade looms. Call it the sunsetting of the 2010s, an opportune time to preview everything from eCommerce to artificial intelligence (AI), from A to Z — here, we can term it APIs to Zelle. . . .
Visa To Acquire Rambus’s Token and Electronic-Ticketing Businesses for $75 Million
Digital Transactions News – June 25, 2019
In a move to expand its tokenization services, Visa Inc. announced Tuesday that it has a deal to buy the token and smart-ticketing businesses of Rambus Inc., a Silicon Valley chip and software provider.
The purchase price is $75 million in cash, according to a regulatory filing from Sunnyvale, Calif.-based Rambus. The token business is part of Rambus’s Smart Card Software Ltd. subsidiary, which will go to Visa under terms of the acquisition and includes the former Bell ID mobile-payment businesses and the Ecebs smart-ticketing systems for transit providers. . . .
Blockchain Might Solve The Problem of Omnichannel Payments
Forbes – June 25, 2019
I have spent over 25 years dealing with commerce systems of one kind or another. The one part of it I hate the most is payments, and I have tried to avoid even dipping my toes in the water, let alone diving in.
That time is over, not because I want it to be, but because true omnichannel commerce is simply not possible without solving the payment problem. I’ve heard multiple retail executives say over the last year that if they could have one thing to make their lives easier, it would be one basket/one swipe. . . .
Cartier, Bulgari and Other Luxury Brands Are Flocking to WeChat
TechCrunch– June 18, 2019
Not long ago, people in China would need to visit a posh, stylish mall for luxury shopping. That’s rapidly changing as high-end brands race to embrace digital channels, which aren’t just the obvious options of ecommerce platforms or brand-owned sites. In China, Louis Vuitton, Cartier, Bulgari and other luxury brands are now connecting and selling to millions of customers through WeChat.
Many know WeChat as China’s largest messaging app, and perhaps how it has over time morphed into an all-in-one ecosystem that lets one chat, run errands, hire services, and shop for an infinite list of things. Now the flurry of different products people find on WeChat may include a $10,000-plus purse. . . .
JPMorgan to Start Customer Trials of Its ‘JPM Coin’ Crypto
Coindesk – June 25, 2019
JPMorgan Chase is to start trials of its “JPM Coin” cryptocurrency in conjunction with corporate clients.
According to a report from Bloomberg Japan on Tuesday, Umar Farooq, the investment bank’s head of digital treasury services and blockchain, said that customers would trial the technology with the ultimate aim of speeding up transactions, such as payments between firms and bond transactions. . . .
Crooks Have Learned to Get Around Static Biometrics and Device ID
PaymentsSource PayThink – June 24, 2019
Most companies use device recognition technologies to try to identify customers through connection information, device IDs and device fingerprints, though bad actors are finding ways around that.
Tracing IP addresses, device IDs, internet service providers and how the device connects into an environment such as a model, operating system, and network connections are all ways that a device can be recognized. . . .
US Payments Forum Sets out Best Practices for Growing Contactless Payments Adoption
NFC World – June 24, 2019 (download the report here)
Customer and cashier education, experience and communication at the point of sale (POS) are all key factors that need to be addressed to boost contactless payments adoption in the US and overcome the currently fragmented experience, according to the US Payments Forum.
Its Consumer Experience at the Contactless Point-of-Sale white paper, published this month, sets out a number of best practices aimed at improving understanding of how contactless works and ensuring a good customer experience. . . .
Why the Biggest Retailers Still Reject Contactless Payments
PaymentsSource – June 20, 2019 (subscription required)
Large U.S. banks and merchants are finally working together to support contactless payments. But two of retail’s biggest players aren’t on board, and for good reason.
No. 1 retailer Walmart and supermarket giant Kroger remain conspicuous holdouts against NFC, while major banks, pharmacy and quick-service restaurant chains — and even mega-retailers like Target — ultimately got on board with contactless. . . .
Chip Cards Make Gains, but the U.S. Still Lags Most of the World in EMV Adoption
Digital Transactions News – June 19, 2019
EMV chip card payments made substantial gains in the U.S. last year, but the nation still lags most other regions in EMV penetration, according to new figures from payment card standards body EMVCo.
Some 53.5% of general-purpose U.S. card-present transactions in 2018 were so-called chip-on-chip, meaning both the point-of-sale terminal and the card were EMV-enabled, up from 41.2% in 2017, EMVCo data show. EMV penetration is highest in EMVCo’s Europe Zone 1 consisting primarily of Western and Northern Europe, with 97.3% of 2018’s POS transactions EMV-enabled—down slightly from 98.6% in 2017. . . .
A Core Group of Consumers Continues To Prefer Cash, Researcher Finds
Digital Transactions News – June 14, 2019
The debut of cashless stores has led to pushback by several cities, the state of New Jersey, and a member of Congress concerned that card or mobile-payments-only options will leave cash-dependent consumers unable to shop in such stores. Now, new research from the Federal Reserve Bank of Atlanta concludes that a proliferation of cashless stores could indeed impose a burden on consumers who don’t have a credit or debit card.
The “Cashless Stores and Cash Users” working paper by Atlanta Fed researcher Oz Shy says some consumers prefer cash even if they have the option of buying prepaid cards. The research is based an analysis of data collected by the Federal Reserve’s separate survey and diary of consumer payment choice studies in 2017, the latter of which includes information on thousands of payment transactions. . . .
Network and PCI Tokenization Have Different Benefits, and Merchants Can Choose Wrong
PaymentsSource PayThink – June 18, 2019
Although often referenced interchangeably, it is apparent that security tokenization and payment tokenization solutions (such as network tokenization) are very different propositions.
Both are effective solutions for their defined purposes, but we should look to network tokenization as a foundational technology enabling secure, simple digital commerce through end-to-end security, global interoperability across different acceptance environments and value-added services. . . .