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Payments News Update – April 5, 2024

Posted  April 5, 2024

Legal and Regulatory Developments

SPOTLIGHT: Mastercard Still Raising Some Fees on Retailers After Settlement
Bloomberg Law – April 3, 2024 (subscription may be required)

Mastercard Inc. plans to increase certain credit card fees charged to merchants beginning April 15, just days after the company and Visa Inc. trumpeted a $30 billion settlement over separate swipe fees designed to provide relief to retail businesses.

The card company plans to raise its network “assessment” fee to 0.14% from 0.13%, equating to an annual increase of $259.1 million, based on the more than $2 trillion in Mastercard transactions last year, according to the Merchants Payments Coalition, a Washington-based group of retailers that advocates against higher payments fees. The group obtained documents shared with Bloomberg Law showing the increase.

Such assessment fees, charged to the retailer as a percentage on each payment with a Mastercard or Visa, are separate from swipe fees, or interchange fees, which are paid to the bank that issues a credit card. . . .

How Amex Is Entangled in the Visa-Mastercard Settlement
Payments Dive – April 1, 2024

In a reversal of prior policies, Visa and Mastercard agreed to let merchants impose a surcharge on consumers for credit card purchases made with their cards regardless of whether American Express provides that leeway. Specifically, they’re allowing merchants to surcharge up to at least 1% of the transaction, and perhaps as high as 3%.

They’re doing so by eliminating their “level-the-playing-field” rules, according to an affidavit filed in federal court last week in the landmark agreement to settle billions of dollars in claims brought by merchants who said the card networks overcharged them for years.

The settlement is expected to spur competition, and perhaps more litigation, according to the affidavit submitted on behalf of the litigants by Columbia University economics professor and Nobel Prize laureate Joseph Stiglitz. . . .

NY Assembly Bill Counters Governor on BNPL
Payments Dive – March 27, 2024 

A bill related to buy now, pay later payments was introduced in the New York legislature last Friday and may serve as an alternative to the proposal made earlier this year by Gov. Kathy Hochul in her proposed budget. The bill is the latest attempt at installing some oversight parameters and consumer guardrails on BNPL and came from Democratic Assemblymember Pamela Hunter, who chairs the banks committee.

The assembly bill counters the governor’s proposal, said Jacob Sherretts, who is Hunter’s policy chief. “There were a number of concerns from stakeholders and members of the assembly,” he said in an interview this week.

New York is one of the first states to consider BNPL regulation. The proposal from Hunter is likely part of legislative give-and-take between the Democratic governor and the legislature, which is controlled by the same party, as they seek to wrap up work on the governor’s proposed budget by April 1. . . .

US Consumer Watchdog to Examine Credit Card Rewards, ‘Buy-Now, Pay-Later’ Companies
Reuters – March 26, 2024 

The top U.S. agency for consumer financial protection will scrutinize credit card reward programs after a surge in customer complaints, its chief said on Tuesday.

Rohit Chopra, director of the U.S. Consumer Financial Protection Bureau, has clashed with credit card issuers since last year over regulations capping late fees. “We are going to be looking into the credit card rewards market due to an increase in consumer complaints,” Chopra told reporters on the sidelines of an industry conference in Washington.

His remarks signaled the agency could also issue rules or take enforcement actions against banks offering products aimed at affluent clients. . . .

Industry Developments

SPOTLIGHT: A Signature Habit
Digital Transactions Magazine – April 1, 2024

Long unneeded in a credit card transaction, the signature at the point of sale still exists. Why?

More than six years ago, the requirement that credit card transactions made at the point of sale be completed with a signature was lifted by the four U.S. card brands. But today, many consumers are still presented with a receipt or a screen to sign for a credit card transaction, especially if a tip is expected.

In 2018, Mastercard Inc. was the first to eliminate its signature rule for transactions made with its U.S. and Canadian credit and debit cards, having announced the change in 2017. American Express Co., Discover Financial Services, and Visa Inc. soon followed. . . .

The Forces Driving JPMorgan Chase to Build a Digital Media Business
American Banker – April 4, 2024 (subscription required)

Chase Media Solutions, the media unit JPMorgan Chase launched this week, will help the bank develop more credit and debit card loyalty programs funded directly by merchants instead of the increasingly fraught card network swipe-fee system, while targeting the bank’s customers more precisely than its previous card-linked deals.

The new business line could also give the financial giant a significant edge over other credit and debit issuers in countering the effects of merchants aggressively steering consumers to their own preferred checkout methods, which may become more widespread through a clause in a recent proposed antitrust settlement Visa and Mastercard reached with merchants to cap and control swipe fees. . . .

Brazil’s Pix Payments Are Killing Cash. Are Credit Cards Next?
Reuters – April 2, 2024

In just three years, Brazil’s hugely popular Pix payment system has become the country’s favorite way to pay, replacing cash and wire transfers in many cases and now threatening the dominance of credit cards in the booming e-commerce sector.

The instant payments designed by Brazil’s central bank are a boon to online retailers, helping with cash flow in a sector with tight margins, while undercutting the legacy business of banks and fintechs built on existing credit card infrastructure.

“I think credit cards will cease to exist at some point soon,” central bank chief Roberto Campos said nearly two years ago, discussing the potential for open finance and the Pix platform. “This system eliminates the need to have a credit card.” Market trends have since added weight to his forecast. . . .