Payments News Update – February 2, 2024
Legal and Regulatory Developments
SPOTLIGHT: Payments Regulation and Legislation Abound in 2024
Payments Dive – January 30, 2024
An odd pair of payments trends will drive increased regulatory and legislative scrutiny of the industry this year. Antitrust concerns are leading regulators and lawmakers to crack down on payments plays by dominant companies, such as card network Visa and tech titan Apple. But a surge in new fintech players is propelling new payments services and shaking up standard industry approaches. While more competition might be expected to offset antitrust concerns, that’s not been so in the payments arena. Instead, the twin trends are doubling the need for increased oversight. . . .
As the new entrants arrive, offering their payments services to consumers and small business operators, industry regulators and lawmakers are standing by warily, primed to protect would-be users. At the same time, they have an interest in shielding fledgling rivals as they battle powerful legacy behemoths. . . .
Visa, Mastercard Ask U.S. Supreme Court to Fix ‘Rampant Confusion’ on Class Certification
Reuters – January 31, 2024
Facing $9 billion in exposure in three antitrust class actions over ATM fees, Visa and Mastercard have asked the U.S. Supreme Court to tighten the standard for trial courts weighing whether to certify plaintiffs to sue as a class. The credit card companies . . . contend that the District of Columbia U.S. Circuit Court of Appeals was too lax when it affirmed a trial court decision certifying a class of ATM operators and two different classes of consumers to pursue claims that Visa and Mastercard squelched competition by blocking ATM operators from offering lower fees for certain transactions.
Supreme Court precedent, wrote Visa and Mastercard Supreme Court counsel from Paul, Weiss, Rifkind, Wharton & Garrison, requires trial courts to use “rigorous analysis” to decide whether classwide issues predominate over individual issues. But the federal appellate circuits, the credit card companies argued, are divided on what that actually means. . . .
Payments Watchdog Mulling Greater Powers as Visa and Mastercard ‘Run Rings’ With Fee Hikes
City A.M. – January 30, 2024
The UK payments watchdog is mulling whether it should have more powers to take firms such as Visa and Mastercard to court if they refuse to provide information. The news comes as the regulator faces criticism for not doing enough to clamp down on post-Brexit credit and debit card fees.
The Payments Systems Regulator (PSR) last month proposed an initial “time-limited” cap of 0.2 per cent for UK-European Economic Area (EEA) debit consumer transactions and 0.3 per cent made by credit cards online, with a lasting cap to be established after further analysis. Fees were previously capped under EU legislation, which was not carried over after Brexit – when prices surged from 0.2 per cent to 1.15 per cent for debit cards and 0.3 per cent to 1.5 per cent for credit cards. . . .
NY May Drive Out BNPL Firms: Attorneys
Payments Dive – January 30, 2024
New York’s attempt to regulate the buy now, pay later market may cause some smaller providers to cease doing business in the state, or adjust their offerings, attorneys said. Earlier this month, New York Gov. Kathy Hochul announced that legislation to regulate the popular installment loans would be included in her fiscal year 2025 budget proposal.
As consumers turn to BNPL loans for everyday and larger purchases, Hochul seeks to require BNPL providers to obtain a license to operate in New York, and have the state’s Department of Financial Services put stronger regulatory guardrails around the industry. In New York, a governor can introduce legislation by way of the executive budget.
The proposed legislation would amend the state’s banking law to give the department licensing and regulatory authority over BNPL providers and loans. That would enable the state to regulate the industry “with a focus on building stronger consumer protections around disclosure requirements, dispute resolution, credit reporting standards, late fee limits, and consumer data privacy,” according to a memorandum in support of the legislation. . . .
Industry Developments
SPOTLIGHT: Apple, Google Could Win the War for the Digital Wallet
Barron’s – January 31, 2024 (subscription required)
Big Tech firms don’t aspire to be banks, but they sure want a cut of their business. Apple, Alphabet, and Amazon.com are rapidly encroaching on financial firms’ territory with digital wallets, payment apps, and even savings accounts. Banks and other financial firms are mounting a counterattack with their own apps—all fighting for a growing prize: billions of dollars in fees and other revenue as digital transactions grow from $9 trillion in 2023 to an estimated $16 trillion over the next five years, according to Juniper Research.
The battle for the digital wallet is also playing out in courts and regulatory fights in Washington. A group of credit unions is suing Apple over its digital wallet, alleging antitrust violations. Banks are lobbying for tech firms to be regulated like banks if they offer banklike services.
Tech giants aren’t pushing into payments and banking for the money per se. Apple isn’t going to move the needle on its $400 billion in annual sales with the 0.15% fee it charges banks to process credit-card transactions on Apple Pay. . . . The bigger prize is monetizing consumer data and building “network effects”—keeping more customers in their ecosystems and selling more hardware or software. . . .
Data Compromises Hit a New High As Cyber Criminals Leverage GenAI And New Attack Vectors
Digital Transactions News – January 25, 2024
Data compromises reported in the United States reached a record high in 2023, totaling 3,205, a 78% rise over 2022 and up 72% from the then record high of 1,860 in 2021, according to the Identity Theft Resource Center’s annual Data Breach Report. It is the first time the number of U.S. data compromises reported in a single year exceeded 2,000, the ITRC says, as new technology like generative artificial intelligence began to play a role. Data compromises include data breaches, data exposures, data leaks, and unspecified data events, according to the ITRC.
Three industries—health care, financial services, and transportation—reported more than double the number of compromises reported in 2022. Some 809 data compromises were reported in the health-care industry, up from 343 in 2022. Financial-services providers reported 744 data compromises, up from 269 in 2022, while 101 data compromises were reported by transportation companies, up from 36 a year earlier. As the number of overall data compromises grows, one emerging trend is that attackers are increasingly targeting vendors within the supply chain to gain a back-door entry into larger companies. . . .