Payments News Update – August 23, 2024
Legal and Regulatory Developments
SPOTLIGHT: BNPL Providers Won’t Face Penalties During Transition to New CFPB Rule
Payments Dive – August 20, 2024
The Consumer Financial Protection Bureau on Friday announced that the agency will not fine buy now, pay later providers while they prepare to work under a new interpretive rule that treats them like credit card providers.
The bureau “does not intend to seek penalties for violations of the rules addressed in the interpretive rule against any buy now, pay later lender while it is transitioning into compliance in a good faith and expeditious manner,” CFPB Director Rohit Chopra said in a blog post.
Chopra wrote that he expects other federal regulators to follow a similar path, though he did not elaborate. . . .
Retailers Meet Wave of Credit Card Suits Citing Decades-Old Law
Bloomberg Law – August 19, 2024 (subscription may be required)
A decades-old law protecting personal information during California credit card transactions is fueling a new wave of privacy litigation that could challenge how online retailers do business.
The Song-Beverly Credit Card Act, passed in California in 1971, limits retailers’ collection of personal information during in-person transactions unless it’s necessary to process the credit card transaction. More than a dozen lawsuits filed since April against major retailers . . . accuse them of violating the law by collecting data, including IP addresses, when those same credit card transactions occur online.
The wave of Song-Beverly cases is the latest in a quest by plaintiffs’ attorneys to apply laws designed for a pre-internet age to the online economy. The litigation poses questions as to what constitutes “necessary data” that can be collected under the law and whether its definition has expanded in the last 50 years. . . .
Industry Developments
SPOTLIGHT: Debit Cards in Digital Wallets Gaining Ground Across Sectors
PYMNTS – August 2024
As consumers leverage digital wallets in greater numbers, businesses across sectors must understand the latest trends to compete. One such trend is that debit cards have become the primary payment method digital wallet users ultimately leverage. This prevalence suggests that many users like digital wallets’ convenience but value the discipline of natural spending limits.
In other developments, Apple Pay’s growing popularity in travel spotlights a move to more seamless payments in this sector. As the appetite for contactless payments grows, this could soon take root in other sectors. These developments offer insights into the factors driving consumer choices and the implications for businesses.
These are just some of the findings detailed in this report. . . .
With Two Major Providers of Real Time Payments, the Request for Payment Takes on a Higher Profile
Digital Transactions News – August 19, 2024
When the Federal Reserve’s FedNow real-time payments service debuted commercially 13 months ago, the story mainly focused on the general concept of immediate money transfers. But since then the payments industry has been busy refining that concept and working on service-ready applications.
One of the most talked-about of these applications is a service called request for payment (RFP), which enables a party to send a “bill” digitally to another party to trigger an immediate digital payment in return. Now, with the commercial launch of FedNow, and with more than 900 financial institutions participating in the new network, that concept is quickly taking shape and capturing the imagination of banks and businesses alike, according to Fed officials.
In offering RFP, FedNow has joined The Clearing House’s RTP network, which has enabled the service since it began operations in 2017. . . .
FedNow to Add More Fraud Tools, Fed Official Says
Payments Dive – August 16, 2024
The Federal Reserve is developing more tools to aid financial institutions using its FedNow instant payments system in fighting fraud, a FedNow official said recently.
The central bank is focused on adding those features as banks and credit unions on the real-time payments system seek to manage risks and fight fraud on the year-old Fed system.
The Fed’s launch of FedNow in July 2023 was the biggest advance to the U.S. payments system in some 40 years. Development of the system took years, and the Fed is trying to lure U.S. banks and credit unions to adopt the system so payments in the U.S. can be accelerated. While payments can sometimes take days to settle, FedNow can clear them in seconds. . . .
Consumers Favor Cash Back Over Other Rewards as a Counter to Inflation, J.D. Power Finds
Digital Transactions News – August 15, 2024
Cashback has replaced miles and rewards as the top credit card perk consumers want, according to J.D. Power’s 2024 U.S. Credit Card Satisfaction Study.
The trend is being driven by inflationary pressures that have hiked credit card interest rates and annual fees. As a result, consumers are gravitating to cards they feel offer incentives that can help them offset the effects of inflation.
Some 58% of cardholders use cashback cards, compared to 31% using cards that earn points or miles. Just 11% of cardholders surveyed use cards that offer no incentives. . . .